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Author:Vega, Clara 

Journal Article
What do chain store sales tell us about consumer spending?

Released at both weekly and monthly intervals, chain store indexes provide a timely measure of the sales performance of large retail companies. This article investigates whether the indexes can also play a role in tracking and forecasting consumer spending as a whole. The authors begin by exploring the extent to which developments in chain store sales are representative of retail sales trends overall. They then conduct formal statistical tests of the relationship between chain store data and official measures of total retail sales and personal consumption expenditure. They find that monthly ...
Economic Policy Review , Volume 2 , Issue Oct , Pages 15-35

Working Paper
Soft information in earnings announcements: news or noise?

This paper examines whether the "soft" information contained in the text of management's quarterly earnings press releases is incrementally informative over the company's reported "hard" earnings news. We use Diction, a textual-analysis program, to extract various dimensions of managerial net optimism from more than 20,000 corporate earnings announcements over the period 1998 to 2006 and document that unanticipated net optimism in managers' language affects announcement period abnormal returns and predicts post-earnings announcement drift. We find that it takes longer for the market to ...
International Finance Discussion Papers , Paper 951

Working Paper
Rise of the machines: algorithmic trading in the foreign exchange market

We study the impact that algorithmic trading, computers directly interfacing at high frequency with trading platforms, has had on price discovery and volatility in the foreign exchange market. Our dataset represents a majority of global interdealer trading in three major currency pairs in 2006 and 2007. Importantly, it contains precise observations of the size and the direction of the computer-generated and human-generated trades each minute. The empirical analysis provides several important insights. First, we find evidence that algorithmic trades tend to be correlated, suggesting that the ...
International Finance Discussion Papers , Paper 980

Working Paper
Informed and strategic order flow in the bond markets

We study the role played by private and public information in the process of price formation in the U.S. Treasury bond market. To guide our analysis, we develop a parsimonious model of speculative trading in the presence of two realistic market frictions -- information heterogeneity and imperfect competition among informed traders -- and a public signal. We test its equilibrium implications by analyzing the response of two-year, five-year, and ten-year U.S. bond yields to order flow and real-time U.S. macroeconomic news. We find strong evidence of informational effects in the U.S. Treasury ...
International Finance Discussion Papers , Paper 874

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

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 ...
Finance and Economics Discussion Series , Paper 2015-46

Working Paper
Counterparty Risk and Counterparty Choice in the Credit Default Swap Market

We investigate how market participants price and manage counterparty risk in the post-crisis period using confidential trade repository data on single-name credit default swap (CDS) transactions. We find that counterparty risk has a modest impact on the pricing of CDS contracts, but a large impact on the choice of counterparties. We show that market participants are significantly less likely to trade with counterparties whose credit risk is highly correlated with the credit risk of the reference entities and with counterparties whose credit quality is relatively low. Furthermore, we examine ...
Finance and Economics Discussion Series , Paper 2016-087

Working Paper
Real-time price discovery in global stock, bond and foreign exchange markets

Using a unique high-frequency futures dataset, we characterize the response of U.S., German and British stock, bond and foreign exchange markets to real-time U.S. macroeconomic news. We find that news produces conditional mean jumps; hence high-frequency stock, bond and exchange rate dynamics are linked to fundamentals. Equity markets, moreover, react differently to news depending on the stage of the business cycle, which explains the low correlation between stock and bond returns when averaged over the cycle. Hence our results qualify earlier work suggesting that bond markets react most ...
International Finance Discussion Papers , Paper 871

Working Paper
The monetary origins of asymmetric information in international equity markets

Existing studies using low-frequency data have found that macroeconomic shocks contribute little to international stock market covariation. However, these papers have not accounted for the presence of asymmetric information where sophisticated investors generate private information about the fundamentals that drive returns in many countries. In this paper, we use a new microstructure data set to better identify the effects of private and public information shocks about U.S. interest rates and equity returns. High-frequency private and public information shocks help forecast domestic money and ...
International Finance Discussion Papers , Paper 872

What do chain store sales tell us about consumer spending?

In recent years, the sales reports of major retail chains have received increasing attention as timely indicators of consumer spending. Despite this attention, a close review of the literature on chain store indexes as macroeconomic indicators reveals that there is no literature! This paper fills this gap, showing how chain store data fit into the broader issues of how we measure and forecast consumer spending. We describe the linkages between chain store data and official measures of consumer spending, highlighting the key seasonality and pricing issues. We then present a battery of ...
Research Paper , Paper 9614

Working Paper
Do energy prices respond to U.S. macroeconomic news? a test of the hypothesis of predetermined energy prices

Models that treat innovations to the price of energy as predetermined with respect to U.S. macroeconomic aggregates are widely used in the literature. For example, it is common to order energy prices first in recursively identified VAR models of the transmission of energy price shocks. Since exactly identifying assumptions are inherently untestable, this approach in practice has required an act of faith in the empirical plausibility of the delay restriction used for identification. An alternative view that would invalidate such models is that energy prices respond instantaneously to ...
International Finance Discussion Papers , Paper 957


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