Dissecting macroeconomic news

Davide E. Avino, Andrei Stancu, Chardin Wese Simen

Research output: Contribution to journalArticle

Abstract

How do macroeconomic events affect the term structure of equity returns? We document that the term structure of equity excess returns is upward sloping on federal fund rate announcement days but not on nonannouncement days. The dividend strips respond significantly to macroeconomic news and the strength of the announcement response declines with the maturity of the dividend asset. Our analysis reveals that nonfarm payrolls surprises have the largest impact on the term structure of dividend strips. The cash flow and discount rate channels both contribute to the response of the dividend asset to macroeconomic news.
Original languageEnglish
Pages (from-to)1047-1077
Number of pages31
JournalJournal of Money, Credit and Banking
Volume53
Issue number5
Early online date19 May 2021
DOIs
Publication statusPublished - Aug 2021

Keywords

  • announcements
  • cash flow
  • discount rates
  • dividend strips
  • options

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