Major Macroeconomic Announcements Research Articles

Fearing the Fed: How wall street reads main street

We provide strong evidence of a countercyclical sensitivity of the stock market to major macroeconomic announcements. The most notable cyclical variation takes place within expansions: sensitivity is largest early in an expansion and essentially zero late in an expansion. By exploiting the comovement pattern between stocks and bonds around announcements, we show that the stock market sensitivity is large when the cash flow component of news is least offset by news about future risk-free rates. Observed fluctuations in stock sensitivities can be attributed to shifting perceptions of monetary policy responsiveness.

Ponašanje gomile na tržištu kriptovalute - stvarno vs lažno gomilanje

This paper sets out to explore whether the investor herding in the cryptocurrency market induces correlations in cryptocurrency returns using the methodology of Chang et al. (2000) and Galariotis et al. (2015) from a daily data sampling period of 3/30/2015 to 5/24/2019. The initial regression results show that the cross-sectional absolute deviation of return can only be explained by GSCI oil and gold index return, but no relationship exists between cross-sectional absolute deviation of return and other regression variables, such as return on CCi30, US equity risk premium and US/Euro exchange rate return. The herding regression results under normal market condition show that a strong tendency exists to herd on non-fundamental information that explains cross-sectional absolute deviation of returns. As such, cryptocurrency returns cannot be predicted on the basis of fundamental economic information (e.g., major macroeconomic announcements). Herding on non-fundamental information is found to be more pronounced during an upward-trending period of the market and other than upward-trending period. No signs of herding on fundamental information could be observed under other market conditions. Although the theory suggests that herding on non-fundamental information results in more efficient outcomes, the above findings do not encourage the diversification of traditional assets with cryptocurrency on the basis of low correlation. Since cryptocurrency lacks intrinsic value, the exchange is shown to provide a pseudo-efficient trading platform for speculative investors. Implications for future research are discussed.

Commonality in liquidity: Effects of monetary policy and macroeconomic announcements

After the recent financial crisis, few issues receive more attention than central banks’ actions or major macroeconomic announcements in markets. Motivated by this fact, we investigate the impact of specific macro-announcements on liquidity commonality in Turkey. Using a weighted spread constructed by a proprietary database of order flows, we reveal that among several developed countries, only U.S. monetary policy and macroeconomic announcements raise commonality in liquidity. Moreover, commonality is significantly affected (increased) only beyond the best price quotes, showing that researchers may obtain misleading results on commonality if they consider spread at the best price levels as a liquidity proxy.

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

AbstractReturns of several US equity exchange‐traded funds on the days of major macroeconomic announcements are examined for the period of January 2009 to July 2013. The ARMA+GARCH model with external linear regression terms that describe announcement events and their surprises is used. It is found that mean daily returns may be notably higher on the announcement days than those for the buy‐and‐hold strategy, though their difference may be not statistically significant. The ISM Manufacturing Reports, Non‐Farm Payrolls, International Trade Balance, Index of Leading Indicators, Housing Starts, and Jobless Claims turn out to be the most statistically significant factors in the model. Three trading strategies that realize daily returns on the various macroeconomic announcement days are compared with the buy‐and‐hold strategy. The choice of announcements with statistically significant regression coefficients yields higher mean daily returns and better Sharpe ratios but possibly lower compound returns. Transaction costs may significantly affect profitability of these trading strategies. Copyright © 2015 John Wiley & Sons, Ltd.

Impact of Macroeconomic Announcements on ETF Trading Volumes

The authors examine the impact of major macroeconomic announcements on the daily trading volumes of several U.S. exchange-traded funds for the period of January 2004–April 2014. An ARIMA model with external factors that describe the announcement events is used. They find that several macroeconomic announcements, particularly the ISM Manufacturing Reports, Non-Farm Payrolls, Housing Starts, and to a lesser extent, Jobless Claims, Leading Indicators, and CPI significantly increase daily trading volumes.

Impact of Macroeconomic Announcements on the ETF Trading Volumes

Impact of major macroeconomic announcements on the daily trading volumes of several US ETFs is examined for the period of January 2004 – April 2014. An ARIMA model with external factors that describe the announcement events is used. It is found that several macroeconomic announcements, particularly the ISM Manufacturing Reports, Non-Farm Payrolls, Housing Starts, and to a lesser extent, Jobless Claims, Leading Indicators, and CPI significantly increase daily trading volumes.

Impact of Macroeconomic Announcements on the ETF Trading Volumes

Impact of major macroeconomic announcements on the daily trading volumes of several US ETFs is examined for the period of January 2004-April 2014. An ARIMA model with external factors that describe the announcement events is used. It is found that several macroeconomic announcements, particularly the ISM Manufacturing Reports, Non-Farm Payrolls, Housing Starts, and to a lesser extent, Jobless Claims, Leading Indicators, and CPI significantly increase daily trading volumes.

Macroeconomic Annnouncements and Volatility of Equity Returns: High-Frequency Evidence from Indonesia

We examine the extent to which equity market returns volatility is affected by major macroeconomic announcements in an emerging market, Indonesia, using high-frequency data and a rolling observation model. We find different patterns of intraday volatility when we decompose the volatility on a monthly, daily, and subsample period basis. Furthermore, while we find that most domestic macroeconomic announcements impact on the volatility, contrary to the literature, we find no evidence of impact from the US macroeconomic announcements. We also find the 2008 global financial crisis significantly influences the impact of macroeconomic announcements on the volatility of Indonesian equity market returns.

Trading activity in the equity market and its contingent claims: An empirical investigation

Abstract Little is known about the joint dynamics of volume across the various contingent claims on the equity market. We study the time-series of trading activity in the cash S&P 500 index and its derivatives (options, the legacy and E-mini futures contracts, and the ETF), and consider their dynamic relation with the macroeconomy, over more than 3000 trading days during 1997–2009. Legacy futures volume has trended downward while other series have trended upward. Total futures volume has increased, suggesting that the trading in the legacy contract has been at least partially supplanted by trading in the E-mini contract. All series are highly cross-correlated and jointly dependent. Signed and absolute trading activity in contingent claims (most prominently, options) predicts shifts in aggregate state variables such as the short interest rate, and the term and credit spreads, as well as signed and absolute returns around major macroeconomic announcements. Overall, consistent with the informational role of options, their volume innovations have the strongest forecasting ability for fluctuations in the macroeconomic environment.

Trading Activity in the Equity Market and Its Contingent Claims: An Empirical Investigation

Little is known about the joint dynamics of volume across the various contingent claims on the equity market. We study the time-series of trading activity in the cash S&P 500 index and its derivatives (options, the legacy and E-mini futures contracts, and the ETF), and consider their dynamic relation with the macroeconomy, over more than 3000 trading days during 1997-2009. Legacy futures volume has trended downward while other series have trended upward. Total futures volume has increased, suggesting that the trading in the legacy contract has been at least partially supplanted by trading in the E-mini contract. All series are highly cross-correlated and jointly dependent. Signed and absolute trading activity in contingent claims (most prominently, options) predicts shifts in aggregate state variables such as the short interest rate, and the term and credit spreads, as well as signed and absolute returns around major macroeconomic announcements. Overall, consistent with the informational role of options, its volume innovations have the strongest forecasting ability for fluctuations in the macroeconomic environment.

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

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.

Impact of Macroeconomic Announcements on Interest Rate Futures: High-Frequency Evidence from Australia

This paper investigates the behavior of Australian interest rate futures around the release of major scheduled macroeconomic announcements. The analysis of price volatility, returns, trading activity and bid-ask spreads finds that the adjustment to new information occurs quickly with the significant part of the reaction complete within 30-seconds. The 30-seconds immediately prior to the announcement exhibits high volatility, low levels of volume, and high bid-ask spreads. In the 30 seconds following the scheduled announcement there is strong evidence of a sharp increase in price volatility, significant positive correlation in returns, large adjusted returns and high levels of trading activity. The reaction is stronger in shorter maturity contracts. There is some evidence of price reversals occurring following this sharp adjustment. The 2007-2008 Global Financial Crisis has had a significant impact on the reaction of Australian interest rate futures to major macroeconomic announcements, with evidence of higher volatility, significantly higher returns and decreasing market activity.

Order imbalance, market returns and macroeconomic news: Evidence from the Australian interest rate futures market

The relationship between order imbalance, market returns and macroeconomic news is examined in the context of the Australian interest rate futures market. Contemporaneous order imbalance exerts a significant impact on market returns in the expected direction i.e. excess buy (sell) orders drive up (down) prices. Order imbalances are related to past market returns with market participants acting in a contrarian manner across all products following market rallies. Nine major macroeconomic announcements are identified with order imbalance, and returns, reacting to such announcements in a manner that correctly reflects the news component. Following a scheduled macroeconomic announcement there is an increase in the level of information asymmetry within the interest rate futures market, demonstrated by an increased sensitivity to order flow. Finally, the pattern of order imbalance immediately prior to scheduled announcements suggests that there is no information leakage.

Order Imbalance, Market Returns and Macroeconomic News: Evidence from the Australian Interest Rate Futures Market

The relationship between order imbalance, market returns and macroeconomic news is examined in the context of the Australian interest rate futures market. Contemporaneous order imbalance exerts a significant impact on market returns in the expected direction i.e. excess buy (sell) orders drive up (down) prices. Order imbalances are related to past market returns with market participants acting in a contrarian manner across all products following market rallies. Nine major macroeconomic announcements are identified with order imbalance, and returns, reacting to such announcements in a manner that correctly reflects the news component. Following a scheduled macroeconomic announcement there is an increase in the level of information asymmetry within the interest rate futures market, demonstrated by an increased sensitivity to order flow. Finally, the pattern of order imbalance immediately prior to scheduled announcements suggests that there is no information leakage.

The Impact of News on the Term-Structure of Breakeven Inflation

We present estimates of the impact of major macroeconomic announcements on two measures of U.S. forward breakeven inflation (the rate of realized forward inflation that leaves an investor equally well off whether he/she holds a nominal or indexed forward investment.) One set of measures is derived from discount curves fit to U.S. Treasury securities and the other set is calculated using inflation swaps. We find that forward breakevens across the maturity structure for both breakeven measures rise with surprises to core CPI, employment, and oil futures and that those responses are broadly similar across the breakeven measures. The reactions of inflation swap breakevens are less precisely estimated and are more variable than the reactions of treasury curve based breakevens. Stability tests find a break in the summer of 2008, which we interpret as separating the period before the worst market disruptions of the 2008 crisis from the crisis period itself.

Which News Moves the Euro Area Bond Market?

Abstract This paper explores a long dataset (1999-2005) of intraday prices on German long-term bond futures and examines market responses to major macroeconomic announcements and ECB monetary policy releases. German bond markets tend to react more strongly to the surprise component in US macro releases compared with aggregated and national euro area and UK releases, and the strength of those reactions to US releases has increased over the period considered. We also document that the numbers of German unemployed workers consistently have been known to investors before official releases.

Convergence and Anchoring of Yield Curves in the Euro Area

We study the convergence of European bond markets and the anchoring of inflation expectations in the euro area using high-frequency bond yield data for France, Germany, Italy, and Spain as well as smaller euro area countries and a control group comprising the UK, Denmark, and Sweden. We find that Economic and Monetary Union (EMU) has led to substantial convergence in euro area sovereign bond markets in terms of interest rate levels, unconditional daily fluctuations, and conditional responses to major macroeconomic announcements. Our findings also suggest a substantial increase in the anchoring of long-term inflation expectations since EMU, particularly for Italy and Spain, which have seen their long-term interest rates become much lower, much less volatile, and much better anchored in response to news. Finally, we present evidence that the elimination of exchange rate risk and the adoption of a common monetary policy were the primary drivers of bond market convergence in the euro area, as opposed to fiscal policy restraint and the loose exchange rate peg of the 1990s.

Convergence and Anchoring of Yield Curves in the Euro Area

We study the convergence of European bond markets and the anchoring of inflation expectations in the euro area from 1993 to 2008, using high-frequency bond yield data for France, Germany, Italy, and Spain; some smaller euro-area countries; and a control group comprising the United Kingdom, Denmark, and Sweden. We find that Economic and Monetary Union (EMU) led to substantial convergence in euro-area sovereign bond markets in terms of interest rate levels, unconditional daily fluctuations, and conditional responses to major macroeconomic announcements. Our findings also suggest a substantial increase in the anchoring of long-term inflation expectations since EMU, particularly for Italy and Spain. Finally, we present evidence that the elimination of exchange rate risk and the adoption of a common monetary policy were the primary drivers of bond market convergence in the euro area, as opposed to fiscal policy and the loose exchange rate peg of the 1990s.

Which News Moves the Euro Area Bond Market?

This paper explores a long dataset (1999-2005) of intraday prices on German long-term bond futures and examines market responses to major macroeconomic announcements and ECB monetary policy releases. In general, adjustments in prices are quick and new information is usually incorporated into prices within five minutes of announcements. The volatility adjustment is more long-lasting than that in the conditional mean, and excess volatility can be observed up to 30 minutes after the releases. Overall, German bond markets tend to react more strongly to the surprise component in US macro releases compared to euro area and domestic releases, and the strength of those reactions to US releases has increased over the period considered. The paper also provides evidence that the outcome of German unemployment figures has been known to investors ahead of the prescheduled release. JEL Classification: E43, E44, E58

Price Discovery in the U.S. Treasury Market: The Impact of Orderflow and Liquidity on the Yield Curve

We examine the role of price discovery in the U.S. Treasury market through the empirical relationship between orderflow, liquidity and the yield curve. We find that orderflow imbalances (excess buying or selling pressure) can account for as much as 26 percent of the day-to-day variation in yields on days without major macroeconomic announcements. The effect of orderflow on yields is permanent and strongest when liquidity is low. All of the evidence points toward an important role of price discovery in understanding the behavior of the yield curve.