Impact Of Macroeconomic News Research Articles

The impact of US macroeconomic news announcements on Chinese commodity futures

Using intraday data from 2013 to 2016, we examine the instantaneous response of eight Chinese commodity futures to 19 different types of scheduled US macroeconomic news announcements after the introduction of night trading in China. We provide robust evidence that the surprise components of a number of news announcements exhibit a significant effect on returns, trading volume, and volatility of a majority of Chinese futures contracts, with gold and silver futures being the most sensitive. Moreover, we observe an asymmetric effect between positive and negative surprise components. A further examination of the responses to the US macroeconomic news announcements using US gold and silver futures over the same sample period provides qualitatively similar results with larger magnitudes. This evidence suggests a possible channel through which the impact of macroeconomic news announcements transmits from the US to the Chinese commodity futures market.

Impact of macroeconomic news, regulation and hacking exchange markets on the volatility of bitcoin

We study whether news and sentiment about bitcoin regulation, the hacking of bitcoin exchanges and scheduled macroeconomic news announcements affect the volatility of bitcoin, measured as realized variance and its jump component. Our results show that realized variance and its jump component exhibit similar dynamics and react similarly to various types of news. Volatility of bitcoin reacts most strongly to news on bitcoin regulation, positive investor sentiment regarding bitcoin regulation extracted using Google searches, and most notably, hacking attacks on cryptocurrency exchanges. Quantile regression reveals that hacking attacks have particularly strong impact on the upper conditional distribution of bitcoin volatility. We also find that the volatility of bitcoin is not influenced by most scheduled US macroeconomic news announcements, such as government budget deficits, inflation, or even monetary policy announcements. On the other hand, bitcoin responds with increased volatility to announcements of forward-looking indicators, such as the consumer confidence index.

The Impact of Macroeconomic News on Chinese Futures

Inspired by the GARCH-MIDAS model, we revisit the relationship between Chinese futures and macroeconomic factors. We introduce the level of the macroeconomic variables into the GARCH-MIDAS model in order to test the impact of the macroeconomic level on the variance of futures’ return volatility. Based on the empirical results, we find the level of macroeconomic variables has a significant impact on the volatility of Chinese futures’ return. The influence of the macroeconomic level factor on the futures’ return volatility is statistically significant.

Quasi-Maximum Likelihood Estimation for Long Memory Stock Transaction Data—Under Conditional Heteroskedasticity Framework

This paper introduces Quasi-Maximum Likelihood Estimation for Long Memory Stock Transaction Data of unknown underlying distribution. The moments with conditional heteroscedasticity have been discussed. In a Monte Carlo experiment, it was found that the QML estimator performs as well as CLS and FGLS in terms of eliminating serial correlations, but the estimator can be sensitive to start value. Hence, two-stage QML has been suggested. In empirical estimation on two stock transaction data for Ericsson and AstraZeneca, the 2SQML turns out relatively more efficient than CLS and FGLS. The empirical results suggest that both of the series have long memory properties that imply that the impact of macroeconomic news or rumors in one point of time has a persistence impact on future transactions.

Connecting the Dots: Market Reactions to Forecasts of Policy Rates and Forward Guidance Provided by the Fed

This paper compares market reactions to forecasts of the policy rate path provided by FOMC participants (“dots”) in the Summary of Economic Projections (SEP) with those to forward guidance provided by the FOMC in its statements. We find that market expectations of the time to lift-off from the zero lower bound are significantly affected in the expected direction by surprises in SEP dots and in forward guidance. We also find a significant impact of macroeconomic news on market participants’ expectations of time to lift-off. These results are consistent with forward guidance about policy rates and SEP forecasts each contributing to the public’s understanding of future Federal Reserve monetary policy, and with the conditionality of both forms of communication about future policy rates being understood. We also present evidence that market expectations concerning the time to lift-off are influenced by the maximum time to lift-off implied by forward guidance, the SEP and the economic outlook. An appendix provides the FOMC’s forward guidance after each meeting from January 2012 to September 2015 and our interpretation of the implied days to lift-off.

Inflation, deflation, and uncertainty: What drives euro-area option-implied inflation expectations, and are they still anchored in the sovereign debt crisis?

We tackle two questions in this paper: In the sovereign debt crisis, what moves the euro-area inflation outlook, and has the firm anchoring of medium to long-term inflation expectations been affected? We try to answer these questions by looking at option-implied probability density functions of future inflation. Deriving densities from a new data set on options on the euro-area harmonised index of consumer prices (excluding tobacco) provides us with the full distribution of inflation expectations, including uncertainty and asymmetry of market participants' beliefs about the inflation outlook. The daily data set allows us to analyse the effects of monetary policy announcements and macro news in a time-varying event study framework despite the short sample period from 2009 to 2013. Due to renewed fears of deflation, we compare option-implied and statistical density functions to gain insight into deflation risk. Inflation expectations show a decreasing mean but growing uncertainty, especially since the intensification of the sovereign debt crisis in mid-2011. Around the same time, the influence of monetary policy announcements on inflation expectations across all horizons diminished. Tail events such as deflation, although still contained, have become more probable. The impact of macroeconomic news on inflation probabilities has overall decreased and shifted towards countries more affected by the crisis. This paper's results regarding the anchoring of inflation expectations are twofold: The mean and low sensitivity to actual news speak for anchored inflation expectations, whereas the growing uncertainty reveals market participants' concerns about possible extreme inflation or deflation outcomes in the future.

Time Varying Probabilities of Currency Carry Trades and Their Determinants: Markov Regime Shifting Models for the AUD and Yen

We investigate carry trade opportunities in major currencies against the US Dollar over the period 2 Jan 1999 to 31 Dec 2012. There is evidence of significant Australian Dollar (AUD), Euro and Japanese Yen (JPY) carry trades during non-crisis periods. The AUD (JPY) was an investment (a funding) currency, and the Euro was both. However, cross currency carry trades were not present. For the AUD and JPY, we find that carry trades were more likely with low volatility and volume. Macroeconomic news that appreciate (depreciate) the AUD (the JPY) also stimulated the AUD (the JPY) carry trades. However, there is no evidence of meaningful and consistent impact of macroeconomic news on the EUR carry trades. For weekly horizon investigations, we find that net long futures positions in the AUD promoted carry trades in the AUD and JPY. However, net long positions in the JPY only managed to reduce JPY carry trade probability.

Common Factors in Analysts’ Earnings Revisions: The Role of Changing Economic Conditions

We examine the role of macroeconomic announcements in shaping the earnings forecasts of equity market analysts. We find that earnings forecasts strongly respond to macroeconomic releases signaling changes in overall business conditions after controlling for analysts’ learning from firm- and industry-specific earnings surprises. We find this effect is industry-specific as analysts’ reliance on macroeconomic news is greater when they follow companies operating in more cyclical industries. In addition, medium-term forecasts respond much more strongly to macroeconomic news than forecasts for the current fiscal year. On average, macroeconomic surprises leads analysts to revise their current year earnings forecasts for cyclical firms by about 3 cents, and subsequent year’s forecasts by about 5 cents. This clearly suggests a strong stock price impact of macroeconomic news via the earnings channel. Macroeconomic reports convey earnings-relevant information, in particular, for longer-term forecasts. In fact, it is highly rewarding for analysts to incorporate macroeconomic information as accuracy of analysts’ earnings forecasts is higher when they put more weight on macroeconomic information in addition to firm-and industry-specific information. Our findings provide a rational explanation of herding suggesting that co-movement among equity analysts may be due to similar responses to public (macroeconomic and firm- and industry-specific) news. Moreover, our findings have important implications for stock valuation models whose performance depends largely on forecast accuracy as well as for recently developed mechanical earnings forecast models.

Impact of macroeconomic news on metal futures

This paper uses intra-day data for the period 2002 through 2008 to examine the intensity, direction, and speed of impact of US macroeconomic news announcements on the return, volatility and trading volume of three important commodities – gold, silver and copper futures. We find that the response of metal futures to economic news surprises is both swift and significant, with the 8:30 am set of announcements – in particular, nonfarm payrolls and durable goods orders – having the largest impact. Furthermore, announcements that reflect an unexpected improvement in the economy tend to have a negative impact on gold and silver prices; however, they tend to have a positive effect on copper prices. In comparison, realized volatility and volume for all three metals are positively influenced by economic news. Finally, there is evidence that several news announcements exert an asymmetric impact on market activity variables.

The impact of macroeconomic news on quote adjustments, noise, and informational volatility

We study the impact of the arrival of macroeconomic news on the informational and noise-driven components in high-frequency quote processes and their conditional variances. We decompose bid and ask returns into a common (“efficient return”) factor and two market-side-specific components capturing market microstructure effects. The corresponding variance components reflect information-driven and noise-induced volatilities. We find that all volatility components reveal distinct dynamics and are positively influenced by news. The proportion of noise-induced variances is highest before announcements and significantly declines thereafter. Moreover, news-affected responses in all volatility components are influenced by order flow imbalances.

The Impact of Macroeconomic News on Quote Adjustments, Noise, and Informational Volatility

We study the impact of the arrival of macroeconomic news on the informational and noise-driven components in high-frequency quote processes and their conditional variances. Bid and ask returns are decomposed into a common (''efficient return'') factor and two market-side-specific components capturing market microstructure effects. The corresponding variance components reflect information-driven and noise-induced volatilities. We find that all volatility components reveal distinct dynamics and are positively influenced by news. The proportion of noise-induced variances is highest before announcements and significantly declines thereafter. Moreover, news-affected responses in all volatility components are influenced by order flow imbalances.

The Impact of Macroeconomic News on Quote Adjustments, Noise, and Informational Volatility

We study the impact of the arrival of macroeconomic news on the informational and noise-driven components in high-frequency quote processes and their conditional variances. Bid and ask returns are decomposed into a common ('efficient return') factor and two market-side-specific components capturing market microstructure effects. The corresponding variance components reflect information-driven and noise-induced volatilities. We find that all volatility components reveal distinct dynamics and are positively influenced by news. The proportion of noise-induced variances is highest before announcements and significantly declines thereafter. Moreover, news-affected responses in all volatility components are influenced by order flow imbalances.

Stock Market Microstructure Measures of Information Asymmetry are Related to Marketwide Information

This paper studies the impact of macroeconomic news on the stock market microstructure measures of information asymmetry. The results show that, due to the daily changes in the information environment, daily information asymmetry has a global impact, though on annual basis, the information asymmetry measures have significantly positive relations with the firm specific cash flow news constructed by using Vuolteenaho's (2002) vector autoregressive model to decompose the individual stock return into cash flow and discount rate news. The daily information asymmetry measures we evaluated significantly increase during both the macroeconomic and the earnings announcement periods, which suggests the important role played by the macroeconomic news on the formation of information asymmetry. Stock information asymmetry measures also co-move with the stock market average and governement bond market information asymmetry measures, and the covariations are significantly larger during macroeconomic- and non-earnings-non-macroecomic-announcement periods than during the earnings announcement periods, suggesting that the macroeconomic news that influence all the firms in the economy mainly induces the covariations in information asymmetry. Furthermore, the results show that macroeconomic news is the important source of the global impact of information asymmetry for firms in both the same and different industries, while possibly correlated cash flow news affecting firms in the same industry is another source of the commonality of information asymmetry for firms within the same industry.

Macroeconomic News and Stock Returns in the United States and Germany

Abstract Using daily data for the January 1997 to June 2002 period, we analyze similarities and differences in the impact of macroeconomic news on stock returns in the United States and Germany. We consider 27 different types of news for the United States and 12 different types of news for Germany. For the United States, we present evidence for asymmetric reactions of stock prices to news. In a boom (recession) period, bad (good) news on GDP growth and unemployment or lower (higher) than expected interest rates may be good news for stock prices. In the period under consideration there is little evidence for asymmetric effects in Germany. However, in the case of Germany, international news appears at least as important as domestic news. There is no evidence that US stock prices are influenced by German news. The analysis of bi-hourly data for Germany confirms these results.

Stock Market Interactions and the Impact of Macroeconomic News - Evidence from High Frequency Data of European Futures Markets

This study analyzes the short-term dynamic spillovers between the futures returns on the DAX, the DJ Eurostoxx 50 and the FTSE 100. It also examines whether economic news is one source of international stock return co-movements. In particular, we test whether stock market interdependencies are attributable to reactions of foreign traders to public economic information. Moreover, we analyze whether cross-market linkages remain the same or whether they do increase during periods in which economic news is released in one of the countries. Our main results can be summarized as follows: (i) there are clear short term international dynamic interactions among the European stock futures markets; (ii) foreign economic news affects domestic returns; (iii) futures returns adjust to news immediately; (iv) announcement timing of macroeconomic news matters; (v) stock market dynamic interactions do not increase at the time of the release of economic news; (vi) foreign investors react to the content of the news itself more than to the response of the domestic market to the national news; and (vii) contemporaneous correlation between futures returns changes at the time of macroeconomic releases.

The Impact of Macroeconomic News on Exchange Rate Volatility

This study investigates the impact of new information on the volatility of exchange rates. The impact of scheduled US and European macroeconomic news on the volatility of USD/EUR 5-minute returns was tested by using the Flexible Fourier Form method. The results were consistent with earlier studies. Macroeconomic news increased volatility significantly, and news on the United States was the most important. The much-tested hypothesis of bad news having a greater impact on volatility was re-confirmed in this study. The announcements were also divided into two categories, the first containing the news that gave conflicting information on the state of the economy (bad and good news at the same time) and the other containing the news that was consistent (where either good or bad news was announced). Conflicting news was found to increase volatility significantly more than consistent news. The impact of 'no-surprise' news was also tested. Even news the forecast of which was equal to an announcement seemed to increase volatility.

An examination of the impact of macroeconomic news on the spot and futures treasuries markets

AbstractIn this study we analyze the reaction of daily cash and futures prices for several Treasury securities to the release of U.S. macroeconomic news. Some important results are reported. First, consistent with the notion of market integration, the futures market is found to be cointegrated with the corresponding cash market. Second, of the 23 types of periodic macroeconomic announcements, 19 of them have a significant influence on either the cash or futures prices. Most notably, surprises in nonfarm payroll and Treasury budget significantly influence the cash and futures market across the entire maturity spectrum. Third, consistent with the Fisher and real activity hypotheses, macroeconomic news that conveys higher inflation and/or economic growth has a negative influence on cash and futures prices. Finally, hedging with Treasury futures appears to offer investors protection from inflation‐related fluctuations in interest rates, but not against fluctuations arising due to variations in real output. Some important policy implications of the results are offered. © 2004 Wiley Periodicals, Inc. Jrl Fut Mark 24:453–478, 2004

Macroeconomic News and the Euro/Dollar Exchange Rate

This paper investigates to what extent daily movements in the euro/dollar rate were driven by news about the macroeconomic situation in the USA and the euro area during the first two years of EMU. We examine whether market participants reacted to news in different ways depending on whether the news came from the USA or from the euro area, and whether the news was good or bad. Furthermore, we investigate whether traders’ reaction to news has changed over time. We find that macroeconomic news has a statistically significant correlation with daily movements of the euro against the dollar. However, this relationship exhibits considerable time variation. There are indications of asymmetric response, but to different extents at different times. Our results also provide evidence that the market seemed to ignore good news and remain fixated on bad news from the euro area, as often claimed in market commentaries, but only for some time. Finally, we find evidence that the impact of macroeconomic news on the euro/dollar rate was stronger when news switches from good to bad or vice versa.(J.E.L.: F31).

Macroeconomic Announcement Effects on the Covariance Structure of Bond Returns

This paper contains a multivariate analysis of the effects of macroeconomic news on the U.S. bond market. In particular, we consider releases of Employment Situation and Producer Price Index (PPI) reports (released monthly on pre-announced dates) and the excess returns of 2, 3, 5, 7, 10, and 30 year Treasury bonds using daily data from 1983 to 1998. We extend the work of Jones, Lamont and Lumsdaine (1998) who analyze macroeconomic announcement effects on bond returns in a univariate GARCH framework. Our main interest is the impact of macroeconomic news on the conditional variances, covariances, and correlations of bond returns. To this end, we apply the factor-ARCH model of Engle, Ng and Rothschild (1990) using the principal components as substitutes for the real common factors. One factor is shown to be adequate, accordingly, the first principal component is assumed to evolve according to a GARCH(1,1) model extended to account for differences between announcement and non-announcement days. In this way, we document that the conditional variance of the common factor is deterministically larger on announcement days by 164%. Moreover, announcement shocks are found to be merely transitory and do not tend to persist. Hence, macroeconomic news cannot explain the observed high degree of persistency of the bond market. In addition, we do not find any leverage effects of announcement shocks. The conditional variances of bond excess returns are significantly larger on announcement days and increase with maturity. Likewise, the conditional covariances are larger on announcement days and increase with the maturity of either bond. Finally, the conditional correlations are found to be larger on announcement days, i.e. the co-movement of bond excess returns is stronger on announcement days than on other days.

Stock Returns and Macroeconomic Information

LINDA ZHANG is affiliated with Baring Asset Management in Boston, Massachusetts. T he impact of information on security equity valuation forms the basis for many equity-based trading models. Much of this research has concentrated on firm-based information such as earnings per share. In contrast, this article focuses on the impact of macroeconomic news releases on the mean and variance of the Standard & Poor’s 500 index. In addition, the companies in the index list are grouped by economic sectors, and the relative impact of macroeconomic news releases on the mean and variance of each economic group return is studied. The macroeconomic information in this study includes a broad set of news announcements, such as inflaŽ tion-related measurement e.g., consumer . price index and real economic-activityŽ related releases e.g., leading economic indicator index, weekly unemployment . claim, etc. . Ž Previous studies e.g., Schwert 1981 ; Pearce and Roley 1985 ; Chen, Roll and Ross 1986 ; Hardouvelis 1987 ; . Jain 1988a ; McQueen and Roley 1993 of the impact of economic news releases on stock indexes have mostly looked at the impact of ‘‘surprise’’ in news releases. The surprise is measured by deviation of either the actual release from the expected or the forecasting error from the moving time series. This article introduces a new variable ex ante uncertainty about news releases, represented by the dispersion of beliefs among economists’ forecasts for releases that may offer additional evidence of the information impact on financial assets. More specifically, this study examines the combined impact of surprise in news releases and ex ante uncertainty about news releases on stock returns and trading volumes. The surprise factor and the information uncertainty complement each other in the following way. With respect to their impact on stock returns, the uncertainty factor is positively associated with returns on inŽ formation release days see, e.g., Shalen . 1993 . Prior to a news release, there is a risk of holding an asset due to uncertainty surrounding the upcoming news release. Investors may require a higher risk premium and the stock price is adjusted downward. On news announcement days, the resolution of uncertainty lowers the Ž . required risk premium all else equal and stock prices rise to capture lower future expected returns. The remaining part of change in price that could not be explained by the resolution of information uncertainty may result from surprise in the news. The impact of surprise in the news and information uncertainty is also examined at economic sector levels. Prelimi-