Macroeconomic Announcement Premium
Hengjie Ai (University of Wisconsin-Madison), et al.
November 2023
The paper reviews the evidence on the macroeconomic announcement premium and its implications on equilibrium asset pricing models. Empirically, a large fraction of the equity market risk premium is realized on a small number of trading days with significant macroeconomic announcements. We review the literature that demonstrates that the existence of the macroeconomic announcement premium implies that investors’ preferences must satisfy generalized risk sensitivity. We show how this conclusion generalizes to environments with heterogeneous investors and demonstrate how incorporating generalized risk sensitivity affects economic analysis in dynamic setups with uncertainty.
Daily Archives: April 12, 2024
Macro Briefing: 12 April 2024
* Biden urged to ban imports of Chinese-made electric cars to US
* IMF chief warns central banks against cutting interest rates too soon
* Gold rallies above $2400/oz.
* China’s exports fell sharply in March in US dollar terms
* US jobless claims fell last week, holding near multi-decade low
* US producer price inflation rises less than expected in March: