Risk–return relationships in foreign‐currency futures following macroeconomic announcements

This study uses the tick data for foreign‐currency futures to examine risk–return relationships on macroeconomic announcements. This study—different from previous studies—examines the risk–return relationship by capturing the announcement effect on returns with announcement surprises and on volatilities with announcement dummies simultaneously in a Generalized Autoregressive Conditional Heteroskedasticity (GARCH) model. Strong risk–return relationships are detected for the first min after the announcements. Furthermore, the return–risk tradeoff ratios differ across currencies and across macroeconomic indicators. The same information can be more profitable when acted on the more liquid currency futures. © 2002 Wiley Periodicals, Inc. Jrl Fut Mark 22: 729–764, 2002     

Turn‐of‐the‐month and intramonth effects: Explanation from the important macroeconomic news announcements

This study provides a new and economically plausible explanation for turn‐of‐the‐month and intramonth anomalies. It is suggested that these anomalies arise from clustered information, namely from important macroeconomic news announcements, which are released systematically at a certain point each month. It is verified that both anomalies exist in SP100 returns. However, once the effect of macroeconomic news announcements has been taken into account, these anomalies disappear. A measure is proposed which uses information from option‐implied volatilities to account for the changes in expected risk premium caused by news announcements. This measure is found to capture incompletely the effects of news announcements, which may due to the misreactions observed on the options market or alternative explanations, such as increased liquidity or investors' overreaction resulting in higher realized returns. Consequently, the underlying mechanism remains to some extent inconclusive although the empirical results provide strong support for the macroeconomic news announcement hypothesis. © 2007 Wiley Periodicals, Inc. Jrl Fut Mark 27:105–126, 2007     

The COVID-19 pandemic and financial markets in Central Europe: Macroeconomic measures and international policy spillovers

This paper investigates the effects of macroeconomic policy announcements on financial markets in three Central European economies: Czechia, Hungary, and Poland (CE–3). We focus on the unprecedented stabilisation policies implemented from March to December 2020 during the COVID-19 pandemic, including unconventional monetary measures and large stimulus programs. Detailed categories of monetary and fiscal measures are introduced into vector autoregressions with exogenous regressors and dynamic conditional correlations, which we estimate using daily data. This allows us to control for policy spillovers from abroad, as well as global risk factors and pandemic-related variables. We find that, in general, macroeconomic policy measures implemented in the CE–3 countries played an important role in stabilising financial markets during the pandemic. We uncover several notable patterns in the reaction of markets to anti-crisis measures across the region. The impact of the monetary policy announcements on 10-year sovereign bond yields was more substantial than on stock market returns and exchange rate returns. The communication of the unconventional tools proved effective in lowering the bond yields. Interestingly, we document that the effects of non-standard measures for some variables, such as the exchange rate, can be qualitatively different from those resulting from a conventional monetary expansion. Even though the domestic monetary events became more important than the fiscal ones, the latter proved relevant for financial market returns, especially when large-scale immediate fiscal measures and tax deferrals were introduced. We also show that the CE–3 economies were subject to the cross-border transmission of policy announcement effects from the Euro Area and the US, although the magnitude of these effects was smaller than expected and varied across the CE–3 countries.     

Real-time price discovery in global stock,bond and foreign exchange markets

Using a unique high-frequency futures dataset, we characterize the response of U.S., German and British stock, bond and foreign exchange markets to real-time U.S. macroeconomic news. We find that news produces conditional mean jumps; hence high-frequency stock, bond and exchange rate dynamics are linked to fundamentals. Equity markets, moreover, react differently to news depending on the stage of the business cycle, which explains the low correlation between stock and bond returns when averaged over the cycle. Hence our results qualify earlier work suggesting that bond markets react most strongly to macroeconomic news; in particular, when conditioning on the state of the economy, the equity and foreign exchange markets appear equally responsive. Finally, we also document important contemporaneous links across all markets and countries, even after controlling for the effects of macroeconomic news.     

Real-time price discovery in global stock, bond and foreign exchange markets

Using a unique high-frequency futures dataset, we characterize the response of U.S., German and British stock, bond and foreign exchange markets to real-time U.S. macroeconomic news. We find that news produces conditional mean jumps; hence high-frequency stock, bond and exchange rate dynamics are linked to fundamentals. Equity markets, moreover, react differently to news depending on the stage of the business cycle, which explains the low correlation between stock and bond returns when averaged over the cycle. Hence our results qualify earlier work suggesting that bond markets react most strongly to macroeconomic news; in particular, when conditioning on the state of the economy, the equity and foreign exchange markets appear equally responsive. Finally, we also document important contemporaneous links across all markets and countries, even after controlling for the effects of macroeconomic news.     

Option volume and volatility response to scheduled economic news releases

In this article, we examine the impact of 21 different types of scheduled macroeconomic news announcements on S&P 100 stock‐index option volume and implied volatility. We find that there is a 2‐h delay after the announcement before volume increases. However, there is an immediate increase in volatility, which slowly dissipates over several hours. Further analysis shows that most of the high volume and volatility after announcements come from the announcements that are considered bad news. That is, bad news creates high volatility and high volume, whereas good news elicits lower volume and is not associated with higher volatility. These results are not consistent with the predictions of any one model. We also find that the announcements that cause the largest reaction in the equity option market are Consumer Credit, Consumer Spending, Factory Inventories, NAPM, and Non‐Farm Payrolls. Six other announcements elicit a mild response. © 2003 Wiley Periodicals, Inc. Jrl Fut Mark 23:315–345, 2003     

Macroeconomic announcements,intraday covariance structure and asymmetry in the interest rate futures returns

The effects of scheduled macroeconomic announcements on the real-time intraday return volatilities, covariances, and correlations between the Eurodollar futures and the U.S. Treasury bond futures markets are studied. These announcements are responsible for most of the observed intraday jumps in volatilities, covariances, and correlations. The details of the linkage are intriguing and include announcements timing effect. Further study on intraday asymmetric volatility and correlation-in-volatility indicates that news announcements magnify asymmetric volatility and shed light on why correlations tend to be high when volatilities are high. © 2008 Wiley Periodicals, Inc. Jrl Fut Mark 28:815–844, 2008     

What moves option‐implied bond market expectations?

This article examines the impact of macroeconomic news announcements on bond market expectations, as measured by option‐implied probability distributions of future bond returns. The results indicate that expected bond market volatilities increase in response to higher‐than‐expected inflation and unemployment announcements. Furthermore, the asymmetries in bond market expectations are found to be affected mostly by surprises in inflation and economic production figures. In particular, it is found that higher‐than‐expected inflation announcements cause optionimplied bond return distributions to become more negatively skewed or less positively skewed, implying a shift in market participants' perceptions toward future increases in interest rates. Finally, the results indicate that market expectations of future extreme movements in bond prices are virtually unaffected by macroeconomic news releases. Some evidence is found, however, that suggests that after extreme surprises in inflation announcements market participants attach higher probabilities for extreme movements in bond prices. © 2005 Wiley Periodicals, Inc. Jrl Fut Mark 25:817–843, 2005     

Intraday Volatility in Interest‐Rate and Foreign‐Exchange Markets: ARCH,Announcement, and Seasonality Effects

We explore the determinants of intraday volatility in interest‐rate and foreign‐exchange markets, focusing on the importance and interaction of three types of information in predicting intraday volatility: (a) knowledge of recent past volatilities (i.e., ARCH or Autoregressive Conditional Heteroskedasticity effects); (b) prior knowledge of when major scheduled macroeconomic announcements, such as the employment report or Producer Price Index, will be released; and (c) knowledge of seasonality patterns. We find that all three information sets have significant incremental predictive power, but macroeconomic announcements are the most important determinants of periods of very high intraday volatility (particularly in the interest‐rate markets). We show that because the three information sets are not independent, it is necessary to simultaneously consider all three to accurately measure intraday volatility patterns. For instance, we find that most of the previously documented time‐of‐day and day‐of‐the‐week volatility patterns in these markets are due to the tendency for macroeconomic announcements to occur on particular days and at particular times. Indeed, the familiar U‐shape completely disappears in the foreign‐exchange market. We also find that estimates of ARCH effects are considerably altered when we account for announcement effects and return periodicity; specifically, estimates of volatility persistence are sharply reduced. Separately, our results show that high volatility persists longer after shocks due to unscheduled announcements than after equivalent shocks due to scheduled announcements, indicating that market participants digest information much more quickly if they are prepared to receive it. However, contrary to results from equity markets, we find no evidence of a meaningful difference in volatility persistence after positive or negative price shocks. © 2001 John Wiley & Sons, Inc. Jrl Fut Mark 21: 517–552, 2001     

Gains from equity carve-outs and subsequent events

This study examines why the stock price of a parent company reacts positively to the announcement of a carve-out. The study also focuses on the gains associated with the combinations of carve-outs and each of four subsequent events: M&A activity, secondary offerings, spin-offs, and reacquisitions. The study finds that these secondary events are useful in evaluating the potential market reactions to carve-out announcements. By analyzing 201 carve-outs conducted by nonfinancial firms in the U.S., this study finds that the stock market reacts favorably toward the stock of a parent company when the parent-subsidiary relationship is preserved after a carve-out. However, this reaction changes when secondary events occur. To be precise, the market does not have a significantly positive reaction to the parent company's stock when the announcement concerns only M&A. These results indicate that the stock market expects secondary events when companies announce carve-outs and that it evaluates the combination of events upon the announcement of the carve-outs. In addition, this study finds that the market expects M&A as a secondary event.     

Is corporate governance important for regulated firms’ shareholders?: Evidence from Japanese mergers and acquisitions

This paper compares the reaction of bidders’ stock prices to acquisition announcements by regulated non-financial firms, banks, and unregulated companies in Japan. Results suggest that regulated non-financial firms do not experience a significant stock price response at merger and acquisition (M&A) announcements, although banks’ and unregulated firms’ M&A announcements are regarded favorably by the stock market. Furthermore, the effect of stock option usage and strict boards on the stock price response is weak for regulated non-financial bidders. The results provide additional evidence that regulation results in managerial decisions’ having less influence on shareholder wealth and thereby changes the firm's optimal governance structure. In contrast, the results provide no clear evidence that, for bank bidders, there is a significantly stronger or weaker relationship between governance and the stock price response to an M&A announcement than that of unregulated firms or regulated non-financial firms. The result does not support the view that regulatory monitoring weakens the effect of ordinary governance mechanisms.     

Macroeconomic information and stock prices

The paper analyzes the response of stock prices to the announcements of 15 representative macroeconomic variables. Stock prices respond primarily to announcements of monetary variables. Stocks of financial companies are the most sensitive to monetary news. Implicit in the stock price reactions are the market perceptions that the Federal Reserve plays an important role in future macroeconomic developments. The post-October 1982 change in the operating target of the Federal Reserve did not affect the stock price responses substantially, although it did affect the corresponding responses of short-term interest rates.     

Market Reaction to Information Shocks—Does the Bloomberg and Briefing.com Survey Matter?

Bloomberg and Briefing.com provide competing forecasts for prescheduled macroeconomic announcements. This study examines the accuracy of these forecasts and market reactions to announcement surprises. Our results show that the Bloomberg survey is slightly more accurate than the Briefing.com survey. More importantly, although announcement surprises based on both surveys have a significant effect on the trading activities and returns of S&P 500 futures contracts, the Bloomberg survey subsumes the explanatory power of the Briefing.com survey. The findings suggest that on average Bloomberg forecasts are more consistent with the market consensus view. In addition, we provide evidence of asymmetric market reactions to positive versus negative announcement surprises. In particular, the market reacts strongly to inflation news in the Consumer Price Index (CPI) and Producer Price Index (PPI) announcements and negative shocks in housing price, personal spending, and retail sales.     

Product Regulation and Stock Prices: The Case of the US Food and Drug Administration

This study focuses on the stock market effects associated with the announcements of product approvals, denials and recalls by the US Food and Drug Administration (FDA), and the impact of product approvals on research and development expenditures (R&D) and forecasts of earnings by Value Line. When the FDA announces approvals, the shareholder wealth of affected firms increases significantly. The announcements of denials and recalls by the FDA are associated with stock price declines. The stock price impact of recalls is dependent on whether the firm voluntarily withdraws a product or if the withdrawal is mandated by the FDA. Specifically, voluntary recalls are not associated with a change in stockholder wealth, while FDA mandated recalls are associated with decreases in stock price. In addition, we find that partial product recalls have a smaller impact than total recalls. An examination of the effects on competitors' stock price reveals losses when the FDA announces an approval or a recall, but no imt for a d. An analysis of changes in risk around FDA decisions suggests that, on average, betas do not change around approvals, recalls or denials. In addition, our results suggest that announcement period stock price behavior is unrelated to risk changes except for approvals where returns are positive and significant for firms with either increasing risk or no change in risk. We also find that approvals are associated with increases in R&D and forecasts of earnings for the sample firms, with returns to stockholders upon announcement of the approval being related to the increases in R&D and short-term earnings forecasts.     

Foreign exchange futures volatility: Day-of-the-week,intraday, and maturity patterns in the presence of macroeconomic announcements

Using standard deviations and numbers of price changes calculated from tick data for currency futures, this study finds strong day-of-the-week effects for both the Deutsche mark and Japanese yen, mild effects for the British pound, and no effects for the Canadian dollar after controlling for scheduled macroeconomic announcements and days to contract expiration. The day-of-the-week effects are found to be caused either by Mondays’ low volatility, or by Thursdays’ or Fridays’ high volatility. This result suggests that the day-of-the-week effects in the currency futures are not driven by the announcements of macroeconomic indicators as proposed in previous studies, but rather by other factors, such as private information-based trading or by market microstructure. This study also finds that the announcements are processed equally across the days of the week for all four currency futures. © 1999 John Wiley & Sons, Inc. Jrl Fut Mark 19: 665–693, 1999     

Market reaction to international joint venture announcement: The case of developed versus less developed countries

Joint ventures across national borders are more advantageous than other forms of international diversification because they afford a better control of technology usage, require a minimal level of cash investment, and present a more effective means of avoiding intervention from the host government. All of these characteristics make international joint ventures uniquely suitable for investments in less developed countries. This paper ascertains whether investors agree with the above sentiment by examining the stock market response to 41 announcements of international joint ventures during 1985-1987, using the event study method. It was found that the stock of the multinational corporations announcing international joint ventures generally outperforms the market In addition, the market reaction to the announcement of international joint ventures in less developed countries is, on average, more favorable than its reaction to the announcement of international joint ventures in developed countries.     

股利政策信息结构与股价行为研究

通过构建股利政策信息结构和时空两维股利信息模型,研究中国上市公司不同股利政策的信息结构、信息环境及其对波动性、市场深度和流动性等股价行为的影响。研究发现现金股利政策公告前,没有发现显著的信息性交易行为;股票股利政策公告前后,市场信息结构没有发生显著的变化;不分配利润的企业在公告前,出现了显著的由信息引起的交易行为;公司发布股利政策不仅能够传递公司价值的信息,而且公司价值信息的传递还与市场所处的信息环境密切相关,不同的信息环境、信息结构影响了信息作用于市场变量的变化路径。     

灾害事件后管理层回应方式对股票收益影响的实证研究——以5.12汶川地震为例

灾害事件发生后,不同公司的管理层往往表现出不同的回应方式,有的承认灾害的影响并积极应对,有的则否认影响或消极逃避。因此,管理层的回应方式可分为接受型和防御型两种。以5.12地震为例,对灾害事件发生后上市公司管理层的回应方式与股票收益的关系进行研究。结果表明,灾害事件后管理层回应方式对股票收益有显著影响,与接受型相比,投资者对防御型回应的反应更积极,且首次公告时回应方式对股票收益的影响显著强于非首次公告。     

Market valuation of marketing alliances in East Asia: Korean evidence

This paper investigates firm value created by non-equity marketing alliance announcements of Korean listed firms in terms of stock price reactions to the announcements. We find evidence that on the Korean stock market, the announcements of marketing alliances produce significant positive abnormal returns, which reflect an increase in firm value, around the announcement date. This suggests that firm managers need to seek for various marketing alliances not only for an effective competition in competitive business environments but also for enhancement in shareholder wealth. The increase in firm value has inverse relationship with firm's size and growth opportunity. In particular, marketing alliances with firms based in G7-countries create greater firm value than ones with firms based in the home country. Our study provides investors, firm managers, and academics with valuable implications of an importance of marketing alliances for valuation of firms in other Asian countries as well as in Korea.     

Do Stock Investors Value Corporate Sustainability? Evidence from an Event Study

This paper analyzes the impacts of index inclusions and exclusions on corporate sustainable firms by studying a sample of US stocks that are added to or deleted from the Dow Jones Sustainability World Index over the period 2002?C2008. The impacts are measured in terms of stock return, risk and liquidity. We cannot find any strong evidence that announcement per se has any significant impact on stock return and risk. However, on the day of change, index inclusion (exclusion) stocks experience a significant but temporary increase (decrease) in stock return. Liquidity deteriorates after the announcement day and bounces back significantly near the day of change. Systematic risk shows little change after announce- ments. But, idiosyncratic risk is higher after announcements. The overall results support Harris and Eitan??s (The Journal of Finance 41(4), 815?C829, 1986) price pressure hypothesis, which posits that event announcement does not carry information and any shift in demand (and hence the corresponding price change and liquidity change) is temporary.