TY - JOUR
T1 - Macroeconomic news announcements and the role of expectations
T2 - Evidence for US bond, stock and foreign exchange markets
AU - Kim, Suk Joong
AU - McKenzie, Michael D.
AU - Faff, Robert W.
PY - 2004/7
Y1 - 2004/7
N2 - We investigate the impact of scheduled government announcements relating to six different macroeconomic variables on the risk and return of three major US financial markets. Our results suggest that these markets do not respond in any meaningful way, to the act of releasing information by the government. Rather, it is the 'news' content of these announcements which cause the market to react. For the three markets tested, unexpected balance of trade news was found to have the greatest impact on the mean return in the foreign exchange market. In the bond market, news related to the internal economy was found to be important. For the US stock market, consumer and producer price information was found to be important. Finally, financial market volatility was found to have increased in response to some classes of announcement and fallen for others. In part, this result can be explained by differential 'policy feedback' effects.
AB - We investigate the impact of scheduled government announcements relating to six different macroeconomic variables on the risk and return of three major US financial markets. Our results suggest that these markets do not respond in any meaningful way, to the act of releasing information by the government. Rather, it is the 'news' content of these announcements which cause the market to react. For the three markets tested, unexpected balance of trade news was found to have the greatest impact on the mean return in the foreign exchange market. In the bond market, news related to the internal economy was found to be important. For the US stock market, consumer and producer price information was found to be important. Finally, financial market volatility was found to have increased in response to some classes of announcement and fallen for others. In part, this result can be explained by differential 'policy feedback' effects.
KW - Expectations
KW - Financial markets
KW - GARCH
KW - Macroeconomic news
UR - http://www.scopus.com/inward/record.url?scp=2442626799&partnerID=8YFLogxK
U2 - 10.1016/j.mulfin.2003.02.001
DO - 10.1016/j.mulfin.2003.02.001
M3 - Article
AN - SCOPUS:2442626799
SN - 1042-444X
VL - 14
SP - 217
EP - 232
JO - Journal of Multinational Financial Management
JF - Journal of Multinational Financial Management
IS - 3
ER -