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Macroeconomic Effects on Stock Jumps

Macroeconomic Effects on Stock Jumps. Allison Keane. Summary. Standardize 13 macro announcements All released at 8:30 AM S kt = (A kt – E kt ) / σ k Overnight returns Opening price minus closing price from previous day Computed z-stats for returns Z = (R-Rm) / σ

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Macroeconomic Effects on Stock Jumps

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  1. Macroeconomic Effects on Stock Jumps Allison Keane

  2. Summary • Standardize 13 macro announcements • All released at 8:30 AM • Skt = (Akt – Ekt ) / σk • Overnight returns • Opening price minus closing price from previous day • Computed z-stats for returns • Z = (R-Rm) / σ • Regress returns and announcements • Rt = βkSk,t + εt

  3. PPI CPI Durable Goods Orders Industrial Production Retail Sales – ex. Auto Average work week Unemployment Rate Hourly Earnings Nonfarm Payrolls Capacity Utilization Business Inventories Consumer Confidence PG – Procter and Gamble F - Ford GM – General Motors KFT – Kraft AIG – American International Group All overnight returns from 2002 - 2007 Announcements and Stocks

  4. PG overnight returns • Mean return = .0036 • Standard Dev. = .0037

  5. PG Z-stats • 21 jump days using 1% significance level

  6. KFT Overnight Returns • Mean = .0044 • Standard Dev. = .0037

  7. KFT Z-Stats • 20 overnight jumps

  8. Ford • Mean = .0092 • St.dev = .0103

  9. Ford • 26 overnight jumps

  10. AIG • Mean = .0055 • St dev = .0069

  11. AIG • 32 days

  12. Rt = βkSk,t + εt

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