Premium for heightened uncertainty: Explaining pre-announcement market returns

• 成果类型: Article
• 署名作者: Hu, Grace Xing; Pan, Jun; Wang, Jiang; Zhu, Haoxiang
• 署名单位: Tsinghua University; Shanghai Jiao Tong University; Massachusetts Institute of Technology (MIT); National Bureau of Economic Research
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2021.09.015
• 发表日期: 2022
• 页码: 909-936
• 关键词: Pre -Announcement drift; Macroeconomic announcements; FOMC; Heightened uncertainty; VIX

摘要

We find large overnight returns with no abnormal variance before nonfarm payrolls, ISM, and GDP announcements, similar to the pre-FOMC returns. To explain this common pattern, we propose a two-risk model with the uncertainty about the magnitude of the impending news' market impact as an additional risk, and link the pre-announcement return directly to the accumulation of heightened uncertainty and its later resolution prior to the announcement. We empirically test and verify the model's distinct predictions on the joint intertemporal behavior of return, variance, and particularly VIX - a gauge of impact uncertainty by our model, surrounding macroeconomic announcements. (c) 2021 Elsevier B.V. All rights reserved.