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Fundamentals, Macroeconomic Announcements and Asset Prices

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  • Aymen Belgacem

Abstract

The aim of this paper is to study the impact of macroeconomic announcements on asset prices, with the objectives of both measuring the average response of stock returns to macroeconomic news surprises, and explaining the sources of such a reaction. To assess the importance of scheduled French and US macroeconomic announcements, Stock returns are analyzed on the French stock market. It is shown that, according to previous studies, there is little evidence of the reaction of the market to those surprises. News about inflation, U.S consumption and real economic activity are specially expected by investors. It confirms the leading role of the U.S. economy and in particular of U.S. consumers in determining the development of the world economy and the dynamics of stock markets. Results also show that unexpected positive surprise in the unemployment rate causes a cut on future excess returns and future dividends. The opposite reaction is observed from the housing starts indicator. The consumer price index appears to have an impact not only on future excess returns, but also on future real interest rates.

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Bibliographic Info

Paper provided by University of Paris West - Nanterre la Défense, EconomiX in its series EconomiX Working Papers with number 2009-16.

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Length: 17 pages
Date of creation: 2009
Date of revision:
Handle: RePEc:drm:wpaper:2009-16

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Keywords: Asset Prices; Macroeconomic Announcements; Event-Study;

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References

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  1. Kenneth N. Kuttner, 2000. "Monetary policy surprises and interest rates: evidence from the Fed funds futures markets," Staff Reports, Federal Reserve Bank of New York 99, Federal Reserve Bank of New York.
  2. Refet Gurkaynak & Brian Sack & Eric Swanson, 2005. "Do Actions Speak Louder than Words? The Response of Asset Prices to Monetary Policy Actions and Statements," Macroeconomics, EconWPA 0504013, EconWPA.
  3. Willem Thorbecke, 1998. "On Stock Market Returns and Monetary Policy," Macroeconomics, EconWPA 9812009, EconWPA.
  4. Roberto Rigobon & Brian Sack, 2006. "Noisy Macroeconomic Announcements, Monetary Policy, and Asset Prices," NBER Working Papers 12420, National Bureau of Economic Research, Inc.
  5. Balduzzi, Pierluigi & Elton, Edwin J. & Green, T. Clifton, 2001. "Economic News and Bond Prices: Evidence from the U.S. Treasury Market," Journal of Financial and Quantitative Analysis, Cambridge University Press, Cambridge University Press, vol. 36(04), pages 523-543, December.
  6. Mark J. Flannery & Aris A. Protopapadakis, 2002. "Macroeconomic Factors Do Influence Aggregate Stock Returns," Review of Financial Studies, Society for Financial Studies, Society for Financial Studies, vol. 15(3), pages 751-782.
  7. Dominique Guégan & Florian Ielpo, 2007. "Further evidence on the impact of economic news on interest," Documents de travail du Centre d'Economie de la Sorbonne, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne b07062, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
  8. Michael J. Fleming & Eli M. Remolona, 1999. "Price Formation and Liquidity in the U.S. Treasury Market: The Response to Public Information," Journal of Finance, American Finance Association, American Finance Association, vol. 54(5), pages 1901-1915, October.
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