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Macroeconomic News Announcements Effect on Stock Prices Allison Keane.

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Presentation on theme: "Macroeconomic News Announcements Effect on Stock Prices Allison Keane."— Presentation transcript:

1 Macroeconomic News Announcements Effect on Stock Prices Allison Keane

2 Outline Background Mathematics Variables Overview Results Extensions

3 Background Mathematics Regression –R t = β k S k,t + ε t Returns –R on = P open,t+1 – P close,t –R 10 = P 10,t+1 - P close,t Standardization –RV = Σr 2 RV week = average of past 7 days RV Calculated using 5 minute returns –R t = R on,t / √RV t-1 –R t = R on,t / √RV week –S k,t = (A k,t – E k,t ) / σ k

4 Variables Stocks –PG, KFT, AIG, GM, F –2002 – 2007 Announcements –PPI, CPI, Durable Goods, Industrial Production, Retail Sales, Average Work Week, Unemployment Rate, Hourly Earnings, Nonfarm Payrolls, Capacity Utilization, Business Inventories, Personal Income

5 Regressions R t = β k S k,t + ε t R t = β k (np) t + β k (he) t + β k (aww) t + β k (ur) t + ε t R t = β k (pt) t + β k (cpi) t + ε t R t = β k (bi) t + β k (r) t + ε t R t = β k (cu) t + β k (ppi) t + β k (d) t + β k (i) t + ε t

6

7 KFT o1t1o3t3 PPI-0.07215-0.25768-0.003220.018814 0.6060.080.9690.821 CPI0.1373720.1071430.013781-0.04364 0.150.3370.8690.637 D0.0221790.194044-0.04184-0.09997 0.8540.1610.880.707 I-0.10507-0.247680.070460.116325 0.3780.0810.5380.313 R0.10212-0.010490.0135060.179088 0.3750.9270.9420.31 AWW-0.12633-0.089020.0501840.053076 0.1880.4620.5320.583 UR-0.0908-0.16759-0.07509-0.10391 0.3640.180.3620.293 HE0.0485630.0740840.1312370.038505 0.5990.5220.0880.681 NP-0.14321-0.174650.0085360.05922 0.1260.1370.910.513 CU-0.05707-0.209280.0697280.137876 0.6430.1540.5540.245 BI0.0086650.1227480.1711080.139644 0.9490.3650.1390.214 PI-0.07428-0.07588-0.08164-0.09316 0.3380.4780.3950.502 AIG o1t1o3t3 PPI-0.33304-0.18739-0.21582-0.25848 0.050.2920.2830.314 CPI-0.17814-0.04113-0.19748-0.09403 0.2430.8330.2580.624 D-0.49018-0.391310.046958-0.22432 0.0180.2030.8290.462 I0.222190.1088430.0062230.068339 0.0730.5870.9730.754 R-0.021550.0525780.172193-0.00691 0.910.8040.4340.979 AWW-0.30672-0.462450.3618630.416523 0.0570.0660.0790.097 UR0.1921830.360395-0.2029-0.03139 0.2550.1690.340.904 HE0.2096380.11464-0.05554-0.16476 0.1760.6370.7830.501 NP-0.24604-0.04996-0.080440.138942 0.120.840.6870.569 CU0.126667-0.05357-0.070020.009752 0.3260.7950.7140.965 BI0.0124610.0555110.0288180.286831 0.9540.830.8760.193 PI-0.112920.095265-0.074040.047223 0.7240.7910.7770.866

8 F o1t1o3t3 PPI-0.065830.013682-0.04508-0.04492 0.5560.9250.7140.736 CPI0.0789490.038572-0.16284-0.18981 0.4980.7540.1850.202 D-0.21252-0.14748-0.008380.004972 0.1480.3270.9520.974 I-0.147820.025390.1489030.205372 0.3020.8790.40.261 R0.1100150.0791730.2885530.200458 0.5250.6780.0440.159 AWW-0.08318-0.205140.1317020.088639 0.3480.2020.2310.501 UR0.0717460.2891560.0312750.147926 0.4360.0820.7850.278 HE0.153910.0933340.168080.142986 0.0670.5460.1080.255 NP-0.041090.0572340.0752350.106014 0.6420.7230.4840.409 CU-0.067530.120458-0.014210.055126 0.6480.4830.9380.771 BI0.2470870.207025-0.24268-0.21255 0.2690.3620.0760.105 PI-0.01927-0.070560.0086330.06067 0.8790.6260.9410.652 G o1t1o3t3 PPI-0.10778-0.00084-0.06811-0.23293 0.7120.9980.740.364 CPI0.383440.3152660.08675-0.0595 0.210.3380.5990.773 D-0.45534-0.326810.4979950.538679 0.050.2490.0840.11 I-0.38157-0.34425-0.059570.135803 0.230.3330.7820.57 R0.1726050.5052850.1217070.186387 0.6450.1860.7070.571 AWW0.3433220.4164390.1853330.127282 0.1040.080.2990.548 UR0.063849-0.00853-0.48493-0.37003 0.7730.9730.0070.089 HE0.3624550.2738540.0599690.149863 0.0720.2310.7260.459 NP0.085430.2384130.0570250.150558 0.6810.3080.7450.47 CU-0.33304-0.28215-0.001540.203836 0.310.4420.9940.407 BI0.13440.415124-0.26821-0.39481 0.7070.2690.4660.268 PI0.2103540.380710.091541 0.290.120.716

9 npawwheurF stat pgo1-0.05084-0.164330.0294450.1599190.1532 pgt1-0.2223-0.15761-0.048190.2036870.0617 pgo3-0.002670.06736-0.00808-0.101310.735 pgt10.0052190.223754-0.08674-0.143590.1585 aigo1-0.18934-0.331080.1939830.1273540.3152 aigt1-0.01883-0.525910.1224830.2177660.2732 aigo3-0.216570.330551-0.23428-0.18820.262 aigt1-0.047370.400673-0.3302-0.018240.4539 kfto1-0.06759-0.102780.105949-0.062280.7126 kftt1-0.07161-0.054940.153368-0.11190.6381 kfto30.026323-0.026120.114141-0.128490.7661 kftt10.075910.0084950.058195-0.12590.8721 fo10.6852 ft10.2311 fo30.6664 ft10.7103 go10.878 gt10.8057 go30.2794 gt10.485 picpiF stat pgo1-0.00932-0.017440.9773 pgt1-0.0866-0.021050.726 pgo30.0508210.0928260.4704 pgt10.1511820.0651210.2881 aigo1-0.11065-0.141890.6909 aigt10.092169-0.008730.9318 aigo3-0.06635-0.177560.6303 aigt10.053161-0.058990.9442 kfto1-0.0760.1407270.3933 kftt1-0.076190.1072640.5957 kfto3-0.083190.0170720.7283 kftt1-0.09459-0.041270.685 fo10.7927 ft10.8408 fo30.4489 ft10.3766 go10.1656 gt10.1846 go30.7737 gt10.9918

10 birF stat cuppidiF stat pgo1.0605922.07570320.6058 pgo10.078307-0.12624-0.309220.0758880.0151 pgt10.036313-0.068620.8224 pgt10.057065-0.13922-0.328170.1668010.0277 pgo3-0.213930.0457890.0635 pgo3-0.021210.0064890.087165-0.037580.8864 pgt1-0.292750.0168080.0375 pgt10.198839-0.008770.158532-0.162530.589 aigo10.033236-0.149180.7969 aigo1-0.14615-0.35691-0.50150.3393710.0836 aigt10.061779-0.091160.9233 aigt1-0.38461-0.23027-0.418390.4269830.4259 aigo30.008110.1224290.8414 aigo3-0.14794-0.176110.0670560.1489160.897 aigt10.259423-0.075420.5725 aigt1-0.08219-0.23134-0.223020.1767250.7638 kfto10.0177780.1021820.7058 kfto10.06369-0.061970.010332-0.145280.905 kftt10.126493-0.002020.6615 kftt1-0.03877-0.248960.184914-0.219690.0728 kfto30.1610040.0041410.3879 kfto30.035407-0.00698-0.019720.0475470.9711 kftt10.1267630.1520410.2964 kftt10.1062750.017315-0.07860.0320120.8368 fo10.101 fo10.3231 ft10.3246 ft10.7767 fo30.006 fo30.3266 ft10.0995 ft10.4522 go10.5357 go10.2533 gt10.0416 gt10.6304 go30.3945 go30.3621 gt10.2193 gt10.2416

11 ppicpibircudinpawwheurpiF stat pgo1-0.1440.00740.06770.1090.06873-0.3090.09024-0.0507-0.164560.029870.1602-0.0150.0554 pgt1-0.1310.0120.0583-0.040.03434-0.3280.18825-0.2221-0.16004-0.04670.2043-0.0930.0528 pgo3-0.0050.0935-0.19610.044-0.00370.0871-0.0418-0.00270.06886-0.0088-0.1020.05310.7164 pgt1-0.0190.1017-0.28850.0230.193080.1584-0.1470.005740.22888-0.0881-0.1440.15810.1121 aigo1-0.343-0.0790.0103-0.08-0.2078-0.5010.38032-0.1891-0.334270.195960.1282-0.1220.3187 aigt1-0.22-0.0050.0365-0.05-0.3816-0.4190.4221-0.0189-0.523830.121320.21730.0770.6996 aigo3-0.201-0.0560.08750.154-0.35990.0670.33586-0.21580.32977-0.2325-0.187-0.0580.7686 aigt1-0.2170.02560.3602-0.04-0.2208-0.2230.30923-0.04630.40376-0.3296-0.0170.0650.802 kfto1-0.0830.1473-0.03590.1180.066330.0104-0.1232-0.0673-0.104760.10736-0.062-0.080.919 kftt1-0.2550.10.06170.041-0.07670.1851-0.1688-0.0716-0.057170.15444-0.112-0.0790.4227 kfto3-0.0060.04110.11970.010.00858-0.020.079880.02629-0.028570.11519-0.128-0.0840.9808 kftt1-0.008-0.0010.13280.1590.06111-0.0780.079710.075820.005710.05929-0.126-0.0930.9283 fo10.7496 ft10.7757 fo30.1758 ft10.5361 go10.4552 gt10.2299 go30.3609

12 Extensions Add more announcements Add more stocks Different regressions Different variable combinations See if response varies with sign –Β k = β 0 + β 1k,t S k,t if S<0 = β 2 + β 3k,t S k,t if S>0

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