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Macro News in Market Moves: Classifying News through Asset Co-movements

Author

Listed:
  • Bruno Feunou
  • Jean-Sébastien Fontaine
  • Rishi Vala

Abstract

This paper introduces CLONE (Classification Of News), a method that decomposes asset price movements into four types of macroeconomic news—aggregate demand, productivity, inflation, and monetary policy—based on joint changes in prices of stocks, bonds, and inflation swaps. CLONE’s simplicity and forward-looking focus enable the identification of real-time economic signals that are critical for understanding market behavior and guiding policy decisions. We show that from 2004 to 2024 aggregate demand news historically dominated daily variation in asset prices, while inflation and monetary policy news have gained importance since 2021. We validate our method against sign-restricted VAR models and apply it to major U.S. macroeconomic data releases, providing insights into how market participants interpret and react to forward-looking information. We discuss several benefits of our approach relative to the standard sign restriction method.

Suggested Citation

  • Bruno Feunou & Jean-Sébastien Fontaine & Rishi Vala, 2026. "Macro News in Market Moves: Classifying News through Asset Co-movements," Staff Analytical Papers 2026-7, Bank of Canada.
    • Handle: RePEc:bca:bocsap:26-7
    DOI: 10.34989/sap-2026-7
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    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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