Determinants of the relative price impact of unanticipated information in U.S. macroeconomic releases

Hess, Dieter

doi:10.1002/fut.10134

Cited by 20 publications

(12 citation statements)

References 32 publications

(26 reference statements)

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“…Consistent with the above model and the findings in Fleming and Remolona (1997), Andersen et al (2003), and Hess (2004), among others, we find that, within a general category of macroeconomic indicators, announcements released earlier tend to have greater impact than those released later. An obvious example is that of GDP, where the advance (first) release has the highest price impact.…”

Section: Price Impact Of Announcementssupporting

confidence: 90%

Is the Intrinsic Value of Macroeconomic News Announcements Related to Their Asset Price Impact?

Gilbert

Scotti

Strasser

et al. 2016

FEDS

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in AbstractThe literature documents a heterogeneous asset price response to macroeconomic news announcements: Some announcements have a strong impact on asset prices and others do not. In order to explain these differences, we estimate a novel measure of the intrinsic value of a macroeconomic announcement, which we define as the announcement's ability to nowcast GDP growth, inflation, and the Federal Funds Target Rate. Using the same nowcasting framework, we then decompose this intrinsic value into the announcement's characteristics: its relation to fundamentals, timing, and revision noise. We find that in the 1998-2013 period, a significant fraction of the variation in the announcements' price impact on the Treasury bond futures market can be explained by differences in intrinsic value. Furthermore, our novel measure of timing explains significantly more of this variation than the announcements' relation to fundamentals, reporting lag (which previous studies have used as a measure of timing), or revision noise.Keywords: Macroeconomic announcements, price discovery, learning, macroeconomic forecasting, coordination role of public information JEL classification: G14, E44ECB Working Paper Series 1882, February 2016 1 Non-technical SummaryMacroeconomic indicators play an important role in business cycle forecasting and receive a lot of public attention. It is well known that these announcements differ massively in their impact on financial markets. In this paper we study why some macroeconomic news releases have a big impact on asset prices while others do not.We study the determinants of the impact of macroeconomic news announcements on asset prices based on their usefulness for forecasting the next release of GDP and inflation, as well as the next Federal Funds Target Rate decision ("nowcasting"). The information used for forecasting consists of the 36 most closely watched U.S. macroeconomic news announcements starting in 1990.Based on a variant of the Kalman Filter with a monthly state vector, we generate forecasts of the three nowcasting targets shortly before the scheduled release time of an announcement.The observation matrix entering the filter is updated every time a macroeconomic variable is released or revised. The analysis is based on the concept of the intrinsic value of an announcement, which is the forecasting weight placed on the macroeconomic announcement at the time of its release. By counterfactually varying the rel...

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Section: Price Impact Of Announcementssupporting

confidence: 90%

Is the Intrinsic Value of Macroeconomic News Announcements Related to Their Asset Price Impact?

Gilbert

Scotti

Strasser

et al. 2016

FEDS

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“…Green (2004), Balduzzi, Elton, and Green (2001), and Fleming and Remolona (1999) find significant coefficients associated with changes in the CPI. Veredas (2006) and Hess (2004) find that the impact of CPI announcements on bond futures contracts is significant. Examining earlier time periods, Urich and Wachtel (1984), and Dwyer and Hafer (1989) find CPI coefficients are not significant.…”

Section: Why the Cost Of Carrying Gold Is Affected By Expected Inflationmentioning

confidence: 96%

Gold prices, cost of carry, and expected inflation

Blose

2010

Journal of Economics and Business

160

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“…We eliminate 15 days in which other reports were released during our 90-minute window, particularly releases of Leading Indicators, Personal Income, and Gross Domestic Product. Furthermore, we eliminate one inadvertently early employment release in November 1998(Fleming and Remolona 1999b) and another three releases which were presumably affected by the temporary shutdown of federal agencies due to the budget dispute during the Clinton administration (seeHess, 2004). This leaves us with a total of 161 observations.…”

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confidence: 99%

Price adjustment to news with uncertain precision

Hautsch

Hess

Müller

2012

Journal of International Money and Finance

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St. Pete, FL, and seminar participants at the University of Konstanz. We are indebted to Kirk Mueller (BLS) and Raman Subri (DOL, ETA) for providing us with historical figures and background sampling statistics on the U.S. Employment Report and Unemployment Insurance Claims. Data on analysts' forecasts are obtained from Money Market Services (MMS) and Informa Global Markets. The first author gratefully acknowledges financial support from the EU Commission through MRTN-CT-2006-034270 COMISEF as well as from the Deutsche Forschungsgemeinschaft through the SFB 649 "Economic Risk". The third author gratefully acknowledges financial support from the Deutsche Forschungsgemeinschaft.

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Determinants of the relative price impact of unanticipated information in U.S. macroeconomic releases

Cited by 20 publications

References 32 publications

Is the Intrinsic Value of Macroeconomic News Announcements Related to Their Asset Price Impact?

Is the Intrinsic Value of Macroeconomic News Announcements Related to Their Asset Price Impact?

Gold prices, cost of carry, and expected inflation

Price adjustment to news with uncertain precision

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