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

RePEc Short ID: psc465
ORCID iD: 0000-0001-6085-0638

Gilbert, Thomas; Scotti, Chiara; Strasser, Georg; Vega, Clara

doi:10.17016/FEDS.2015.046r1

Working Paper

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.

Keywords: Macroeconomic announcements; Price discovery; Learning; Forecasting; Now-casting;

JEL Classification: C53; D83; E37; E44; E47; G14;

https://doi.org/10.17016/FEDS.2015.046r1