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Tracking the Economic Impact of the Pandemic Using High-Frequency Data
High-frequency data can provide a quicker snapshot of economic conditions than data that take weeks or months to become available.
Newsletter
Blending Traditional and Alternative Labor Market Data with CHURN
In this article, we present a new real-time model called CHURN—short for Chicago Fed Unemployment Rate Nowcast. CHURN provides a weekly tracking estimate for the civilian unemployment rate (UR) produced by the U.S. Bureau of Labor Statistics (BLS). To do so, CHURN blends monthly statistics on job flows (i.e., job-finding and job-separation rates) from the BLS and other traditional labor market indicators with alternative high-frequency indicators from private sector sources.
What Causes “Jumps” in Stock Prices?
An analysis examines which types of macroeconomic announcements tend to be most often associated with jumps in U.S. stock prices.
Working Paper
Testing for Multi-Asset Systemic Tail Risk
We develop a testing framework to measure market-wide (systemic) tail risk in the cross-section of asset returns. Using high-frequency data on individual U.S. stocks and sector-specific ETF portfolios, we estimate time-varying jump intensities and test for multi-asset tail risk around Fed policy announcements. The magnitude of the tail risk induced by Fed policy announcements varies over the business cycle, peaks during the global financial crisis, and remains high during phases of unconventional monetary policy. While most FOMC announcements generate systemic left-tail risk, there is no ...
Working Paper
Backtesting Systemic Risk Measures During Historical Bank Runs
The measurement of systemic risk is at the forefront of economists and policymakers concerns in the wake of the 2008 financial crisis. What exactly are we measuring and do any of the proposed measures perform well outside the context of the recent financial crisis? One way to address these questions is to take backtesting seriously and evaluate how useful the recently proposed measures are when applied to historical crises. Ideally, one would like to look at the pre-FDIC era for a broad enough sample of financial panics to confidently assess the robustness of systemic risk measures but ...
Working Paper
Estimation of the discontinuous leverage effect: Evidence from the NASDAQ order book
An extensive empirical literature documents a generally negative correlation, named the ?leverage effect,? between asset returns and changes of volatility. It is more challenging to establish such a return-volatility relationship for jumps in high-frequency data. We propose new nonparametric methods to assess and test for a discontinuous leverage effect ? i.e. a relation between contemporaneous jumps in prices and volatility ? in high-frequency data with market microstructure noise. We present local tests and estimators for price jumps and volatility jumps. Five years of transaction data from ...
Working Paper
Mind Your Language: Market Responses to Central Bank Speeches
Post-meeting central bank communication often moves markets, but researchers have paid less attention to the more frequent central bankers’ speeches. We create a novel dataset of U.S. Federal Reserve speeches and develop supervised multimodal natural language processing methods to identify how monetary policy news affect bond and stock market volatility and tail risk through implied changes in forecasts of GDP, inflation, and unemployment. We find that forecast revisions derived from FOMC member speeches can help explain volatility and tail risk in both equity and bond markets. Speeches ...
Working Paper
Heterogeneity in the Marginal Propensity to Consume: Evidence from Covid-19 Stimulus Payments
We identify 22,340 recipients of Covid-19 Economic Impact Payments in anonymized transaction-level debit card data from Facteus. We use an event study framework to show that in the two weeks following a sudden $1,200 payment from the IRS, consumers immediately increased spending by an average of $604, implying a marginal propensity to consume (MPC) of 50%. Consumer spending fell back to normal levels after two weeks. Stimulus recipients who live paycheck-to-paycheck spend 62% of the stimulus payment within two weeks, while recipients who save much of their monthly income spend only 35% of the ...
Working Paper
Systemic Tail Risk: High-Frequency Measurement, Evidence and Implications
We develop a new framework to measure market-wide (systemic) tail risk in the cross-section of high-frequency stock returns. We estimate the time-varying jump intensities of asset prices and introduce a testing approach that identifies multi-asset tail risk based on the release times of scheduled news announcements. Using high-frequency data on individual U.S. stocks and sector-specific ETF portfolios, we find that most of the FOMC announcements create systemic left tail risk, but there is no evidence that macro announcements do so. The magnitude of the tail risk induced by Fed news varies ...
Working Paper
The response of multinationals’ foreign exchange rate exposure to macroeconomic news
We use intraday data to estimate the daily foreign exchange exposure of U.S. multinationals and show that macroeconomic news affects these firms? foreign exchange exposure. News creates a substantial shift in the joint distribution of stock and exchange rate returns that has both a transitory and a persistent component. For example, a positive domestic demand surprise, as reflected in higher-than-expected nonfarm payroll, increases the value of the low-exposure domestic activities and results in a persistent decrease in foreign exchange exposure.