Impact of Macroeconomic Announcements on US Equity Prices: 2009-2013

Abstract

We examine returns of several US equity ETFs on the days of 18 major macroeconomic announcements for the period of January 2009 – July 2013. The ARMA GARCH model with external regression terms that describe announcement events and their surprises is used. We find that ISM Manufacturing Reports, Non-Farm Payrolls, International Trade Balance, Index of Leading Indicators, Housing Starts, Jobless Claims are the most significant factors in our model. We compare performance of the buy-and-hold strategy (BH yet their differences are not statistically significant (p-value > 0.6). Mean daily returns for Model p5 are dramatically higher than that of Model #18 and have better statistical significance than that of B&H. However, compound returns for Model p5 may be lower than those of Model #18 and even lower than those of B&H due to the bull nature of the market during 2009 – 2013 and due to relatively small numbers of days when the Model p5 invested money in the market. Yet relatively short exposure to the market risk can yield a better effective Sharpe ratio for Model p5 than that of for B&H.