Is the Intrinsic Value of Macroeconomic News Announcements Related to their Asset Price Impact?
Abstract: The literature documents a heterogeneous asset price response to macroeconomic news announcements. We explain this variation with a novel measure of the intrinsic value of an announcement - the announcement's ability to nowcast GDP growth, inflation, and the Federal Funds Target Rate-and decompose it into the announcement's relation to fundamentals, a timeliness premium, and a revision premium. We find that differences in intrinsic value can explain a significant fraction of the variation in the announcements' price impact on Treasury bond yields. The announcements' timeliness and relation to fundamentals are the most important characteristics in explaining this variation.
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Part of Series: Finance and Economics Discussion Series
Publication Date: 2016-12-08
Pages: 58 pages