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Home | Events Archive | Caught by surprise: how markets respond to macroeconomic news
Master's Thesis defense

Caught by surprise: how markets respond to macroeconomic news


  • Series
    MPhil Defense
  • Speaker
    Amar Soebhag
  • Location
    Erasmus University, E-Building, Room EB-12
    Rotterdam
  • Date and time

    September 26, 2019
    08:30 - 09:30

We propose a new method to measure the current state of economic surprises across different economic releases. Empirically, economic surprises related to macroeconomic growth consistently and robustly predict short-term returns in risky asset classes (equities, credits, commodities), while it predicts bond returns over a yearly forecast horizon. These effects are attributable to short-run momentum in economic surprises. A simple investment strategy using growth surprises outperforms equity markets, providing annualized alpha’s between 2.74% and 4.22%.