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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 news 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.

Suggested Citation

  • Linda S. Goldberg & Christian Grisse, 2013. "Time variation in asset price responses to macro announcements," Staff Reports 626, Federal Reserve Bank of New York.
  • Handle: RePEc:fip:fednsr:626
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    Citations

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    Cited by:

    1. Piergiorgio Alessandri & Antonio M. Conti & Fabrizio Venditti, 2016. "The Financial Stability Dark Side of Monetary Policy," BCAM Working Papers 1601, Birkbeck Centre for Applied Macroeconomics.
    2. Linda S. Goldberg, 2013. "Banking globalization, transmission, and monetary policy autonomy," Staff Reports 640, Federal Reserve Bank of New York.
    3. 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, pages 78-106.
    4. Ben Omrane, Walid & Savaşer, Tanseli, 2016. "The sign switch effect of macroeconomic news in foreign exchange markets," Journal of International Financial Markets, Institutions and Money, Elsevier, pages 96-114.
    5. Eguren-Martin, Fernando & McLaren, Nick, 2015. "How much do UK market interest rates respond to macroeconomic data news?," Bank of England Quarterly Bulletin, Bank of England, vol. 55(3), pages 259-272.
    6. Malovaná, Simona & Frait, Jan, 2017. "Monetary policy and macroprudential policy: Rivals or teammates?," Journal of Financial Stability, Elsevier, vol. 32(C), pages 1-16.
    7. Thomas Gilbert & Chiara Scotti & Georg H. Strasser & Clara Vega, 2015. "Is the Intrinsic Value of Macroeconomic News Announcements Related to Their Asset Price Impact?," Boston College Working Papers in Economics 874, Boston College Department of Economics, revised 23 Apr 2015.
    8. repec:eee:moneco:v:92:y:2017:i:c:p:78-95 is not listed on IDEAS
    9. Marcello Pericoli & Giovanni Veronese, 2015. "Forecaster heterogeneity, surprises and financial markets," Temi di discussione (Economic working papers) 1020, Bank of Italy, Economic Research and International Relations Area.
    10. 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, pages 78-106.
    11. Adrian Jäggi & Martin Schlegel & Attilio Zanetti, 2016. "Macroeconomic surprises, market environment and safe-haven currencies," Working Papers 2016-15, Swiss National Bank.
    12. Kahn, George A. & Taylor, Lisa, 2014. "Evolving market perceptions of Federal Reserve policy objectives," Macro Bulletin, Federal Reserve Bank of Kansas City, pages 1-2.
    13. Kahn, George A. & Taylor, Lisa, 2014. "Evolving market perceptions of Federal Reserve policy objectives," Macro Bulletin, Federal Reserve Bank of Kansas City, pages 1-2.
    14. Alberto Caruso, 2016. "The Impact of Macroeconomic News on the Euro-Dollar Exchange Rate," Working Papers ECARES ECARES 2016-32, ULB -- Universite Libre de Bruxelles.
    15. repec:eee:finana:v:52:y:2017:i:c:p:130-143 is not listed on IDEAS
    16. Lubos Komarek & Kristyna Ters, 2016. "Intraday dynamics of euro area sovereign credit risk contagion," BIS Working Papers 573, Bank for International Settlements.

    More about this item

    Keywords

    Rate of return ; Foreign exchange rates ; Assets (Accounting) ; Government securities ; Risk ; Monetary policy;

    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • 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
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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