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Board of Governors of the Federal Reserve System (US)
Finance and Economics Discussion Series
Is the Intrinsic Value of Macroeconomic News Announcements Related to their Asset Price Impact?
Thomas Gilbert
Chiara Scotti
Georg Strasser
Clara Vega
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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Thomas Gilbert & Chiara Scotti & Georg Strasser & Clara Vega, Is the Intrinsic Value of Macroeconomic News Announcements Related to their Asset Price Impact?, Board of Governors of the Federal Reserve System (US), Finance and Economics Discussion Series 2015-46, 23 Apr 2015, revised 08 Dec 2016.
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Keywords: Macroeconomic announcements; Price discovery; Learning; Forecasting; Now-casting
DOI: 10.17016/FEDS.2015.046r1
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