Missing Events in Event Studies: Identifying the Effects of Partially Measured News Surprises
Refet S. Gürkaynak, Burçin Kisacikoğlu, Jonathan H. Wright
American Economic Review · 2020 · Volume 110 · Issue 12
Abstract
Macroeconomic news announcements are elaborate and multi-dimensional. We consider a framework in which jumps in asset prices around announcements reflect both the response to observed surprises in headline numbers and to latent factors, reflecting other news in the release. Non-headline news, for which there are no expectations surveys, is unobservable to the econometrician but nonetheless elicits a market response. We estimate the model by the Kalman filter, which efficiently combines OLS and heteroskedasticity-based event study estimators in one step. With the inclusion of a single latent surprise factor, essentially all yield curve variance in event windows are explained by news.
Keywords
Model Construction and Estimation, Interest Rates: Determination, Term Structure, and Effects, Monetary Policy, Equities, Fixed Income Securities, Information and Market Efficiency, Event Studies, Insider Trading
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