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Time Variation in Asset Price Responses to Macro Announcements

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  • Linda S. Goldberg
  • Christian Grisse

Abstract

Although the effects of economic news announcements on asset prices are well established, these relationships are unlikely to be stable. This paper documents the time variation in the responses of yield curves and exchange rates using high frequency data from January 2000 through August 2011. Significant time variation in news effects is present for those announcements that have the largest effects on asset prices. The time variation in effects is explained by economic conditions, including the level of policy rates at the time of the release, and risk conditions: government bond yields increase in response to "good news", but less so when risk is elevated. Risk conditions matter since they can capture the effects of uncertainty on the information content of news announcements, the interaction of monetary policy and financial stability objectives of central banks, and the effect of news announcements on the risk premium.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 19523.

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Date of creation: Oct 2013
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Handle: RePEc:nbr:nberwo:19523

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  1. Ehrmann, Michael & Fratzscher, Marcel & Gürkaynak, Refet S. & Swanson, Eric, 2007. "Convergence and anchoring of yield curves in the euro area," Working Paper Series 0817, European Central Bank.
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Cited by:
  1. Kahn, George A. & Taylor, Lisa, 2014. "Evolving market perceptions of Federal Reserve policy objectives," Economic Review, Federal Reserve Bank of Kansas City, issue Q I, pages 1-64.
  2. Chang, Su-Hsin & Contessi, Silvio & Francis, Johanna L., 2014. "Understanding the accumulation of bank and thrift reserves during the U.S. financial crisis," Journal of Economic Dynamics and Control, Elsevier, vol. 43(C), pages 78-106.
  3. Linda S. Goldberg, 2013. "Banking Globalization, Transmission, and Monetary Policy Autonomy," NBER Working Papers 19497, National Bureau of Economic Research, Inc.
  4. Linda S. Goldberg, 2013. "Banking globalization, transmission, and monetary policy autonomy," Staff Reports 640, Federal Reserve Bank of New York.

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