Abstract
We investigate macroeconomic investment strategies that follow a simple switching approach: on days when important macroeconomic news is announced, the investor invests in the stock market; on other days, the investor invests in the risk-free asset. This type of strategy displays better risk-return characteristics than a long-only investment does. Asset pricing tests also indicate that the market risk premium is significantly higher on announcement days (ADs) than on non-announcement days. In contrast, returns of the size and value factors are not significantly higher on ADs than on the others. Returns of this type of strategy can be improved by the use of lagged information.
Published Version
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