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How Much Do Investors Care About Macroeconomic Risk? Evidence from Scheduled Economic Announcements


  • Savor, Pavel
  • Wilson, Mungo


Stock market average returns and Sharpe ratios are significantly higher on days when important macroeconomic news about inflation, unemployment, or interest rates is scheduled for announcement. The average announcement-day excess return from 1958 to 2009 is 11.4 basis points (bp) versus 1.1 bp for all the other days, suggesting that over 60% of the cumulative annual equity risk premium is earned on announcement days. The Sharpe ratio is 10 times higher. In contrast, the risk-free rate is detectably lower on announcement days, consistent with a precautionary saving motive. Our results demonstrate a trade-off between macroeconomic risk and asset returns, and provide an estimate of the premium investors demand to bear this risk.

Suggested Citation

  • Savor, Pavel & Wilson, Mungo, 2013. "How Much Do Investors Care About Macroeconomic Risk? Evidence from Scheduled Economic Announcements," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 48(2), pages 343-375, April.
  • Handle: RePEc:cup:jfinqa:v:48:y:2013:i:02:p:343-375_00

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