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Size, Book-to-Market Ratio and Macroeconomic News

Author

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  • Tolga Cenesizoglu

Abstract

Little is known about the reactions of daily returns on portfolios with different characteristics to unexpected changes in macroeconomic conditions. This paper fills this void by analyzing the reactions of daily returns on portfolios formed on size and book-to-market ratio to news about a wide range of macroeconomic variables. Returns on different portfolios not only react to different news but also react differently to the same news. Reactions of portfolios to macroeconomic news also change over the business cycle. Results are strongest for news about employees on nonfarm payrolls in expansions. Both at daily and monthly frequencies, large and growth firms react differently to employment news from small and value firms in expansions but not in recessions. Differences in the sensitivities of expected future cash flows to employment news in expansions can help explain differences in the observed reactions.

Suggested Citation

  • Tolga Cenesizoglu, 2010. "Size, Book-to-Market Ratio and Macroeconomic News," Cahiers de recherche 1033, CIRPEE.
    • Handle: RePEc:lvl:lacicr:1033
    as

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    File URL: http://www.cirpee.org/fileadmin/documents/Cahiers_2010/CIRPEE10-33.pdf
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    More about this item

    Keywords

    Macroeconomic News; Employees on Nonfarm Payrolls; Business Cycles; Cash Flow; Discount Rate; Return Decomposition;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • 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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