Investors’ Behavior Towards Pre-Scheduled Macroeconomic News

Abstract

In this thesis, we study how the macroeconomic risk concerning pre-scheduled news affect investors’ behavior in the US. On days when key macroeconomic news such as PPI numbers, Labor reports and FOMC statements are scheduled for release, the daily stock market excess return is significantly higher than on nonannouncement days. Of the different news releases, the FOMC statement has the largest impact on the stock market. Furthermore, the result reveals an overall increase in realized volatility on announcement days, whereas the implied volatility drops once the news is announced. Our findings demonstrate how investors are compensated for the macroeconomic risk associated with the news releases. Keywords: Macroeconomic news; Stock market return; Implied volatility