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Size, book-to-market ratio and macroeconomic news

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  • Cenesizoglu, Tolga
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    Abstract

    Little is known about the reactions of daily returns on portfolios with different characteristics to unexpected changes in macroeconomic conditions. This paper fills this void by analyzing the reactions of daily returns on portfolios formed on size and book-to-market ratio to news about a wide range of macroeconomic variables. Returns on different portfolios not only react to different news but also react differently to the same news. Reactions of portfolios to macroeconomic news also change over the business cycle. Results are strongest for news about Employees on Nonfarm Payrolls in expansions. Both at daily and monthly frequencies, large and growth firms react differently to employment news from small and value firms in expansions but not in recessions. Differences in the sensitivities of expected future cash flows to employment news in expansions can help explain differences in the observed reactions.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Empirical Finance.

    Volume (Year): 18 (2011)
    Issue (Month): 2 (March)
    Pages: 248-270

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    Handle: RePEc:eee:empfin:v:18:y:2011:i:2:p:248-270

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    Web page: http://www.elsevier.com/locate/jempfin

    Related research

    Keywords: Macroeconomic news Employees on Nonfarm Payrolls Business cycle Cash flow Discount rate Return decomposition;

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    Cited by:
    1. Wan, Yang & Clutter, Michael L. & Siry, Jacek P. & Mei, Bin, 2013. "Assessing the impact of macroeconomic news on the U.S. forest products industry portfolio across business cycles: 1963–2010," Forest Policy and Economics, Elsevier, vol. 28(C), pages 15-22.
    2. Demirer, Rıza & Jategaonkar, Shrikant P., 2013. "The conditional relation between dispersion and return," Review of Financial Economics, Elsevier, vol. 22(3), pages 125-134.

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