Macroeconomic Effects on Stock Jumps Allison Keane February 20, 2008

Overview Part 1: Compiled data on macroeconomic announcements from Jun 2001 – Dec 2007 Compared announcement dates with dates of jumps for four stocks Part 2: Regression of stocks on announcements

Macro Announcements PPI CPI Durable Goods Orders Industrial Production Prices of goods at wholesale level CPI Price level of a fixed group of goods Durable Goods Orders Volume of orders and shipments of goods that will last longer than three years Industrial Production Measure of output of factories, mines, utilities Retail Sales – ex. Auto Total receipts of retail stores – consumer spending indicator

Stocks Procter & Gamble (PG), Kraft (KFT), American International Group (AIG), and Ford (F) Calculated jumps from June 2001 – Dec 2007 Pulled out the date corresponding to each jump

Results Stock # Jump Days # Jump / Announce days percentage PG 49 9 18.37 KFT 201 46 22.89 AIG 10 20.41 F 101 15 14.85

Regression Regress the returns with announcements at the same time Rt = βkSk,t + εt Determine if the coefficients are significant Standardization of announcements Skt = (Akt – Ekt ) / σk

Expansion Gather data for more announcements and apply to more stocks Research microeconomic announcement Regression for first five announcements Different regressions