Macroeconomic Effects on Stock Jumps

Allison Keane

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

Announcements and Stocks

• 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

PG overnight returns

•Mean return = .0036

•Standard Dev. = .0037

PG Z-stats

•21 jump days using 1% significance level

KFT Overnight Returns

•Mean = .0044

•Standard Dev. = .0037

KFT Z-Stats

•20 overnight jumps

Ford

• Mean = .0092• St.dev = .0103

Ford

• 26 overnight

jumps

AIG

• Mean = .0055

• St dev = .0069

AIG

• 32 days

PG KFT F GM AIGPPI 0.000045 -6.3E-05 -0.00113 -0.00055 -0.00095

0.000624 0.000937 0.00166 0.001536 0.001061CPI 0.00065 0.00014 0.001244 0.002473 -0.00094

0.000615 0.000924 0.001637 0.001513 0.001046D 0.000616 0.000616 -0.00287 -0.0029 0.000355

0.000719 0.000719 0.001911 0.001768 0.001222I -0.00038 -0.00038 -0.00205 -0.00238 0.000204

0.000616 0.000616 0.001641 0.001517 0.001049R 0.000268 0.000101 0.001324 0.001653 0.000657

0.000652 0.000979 0.001735 0.001602 0.001105AWW 0.00048 0.000324 -0.00097 0.001062 0.001129

0.000595 0.000894 0.001583 0.001464 0.001011UR -0.00074 -0.00081 0.000664 -0.0006 -0.00148

0.000617 0.000927 0.001642 0.001519 0.001049HE -1.8E-05 0.000535 0.001791 0.001094 -0.00081

0.000562 0.000844 0.001494 0.001383 0.000955NP -2.8E-05 -0.00017 -0.00065 -0.00016 -0.0008

0.000598 0.000897 0.00159 0.001471 0.001016CU -0.00037 0.000621 -0.00102 -0.00204 -0.00013

0.000637 0.000955 0.00167 0.001564 0.001083BI -0.0015 0.001351 0.003647 0.00079 7.18E-05

0.000653 0.000982 0.001739 0.001611 0.001113CC -0.0005 0.000743 -0.00186 0.000004 0.001004

0.00065 0.000976 0.001729 0.0016 0.001105

PG KFT GM F AIGppi -3.5E-05 -5.1E-05 -0.00088 -0.0014 -0.00106cpi 0.00066 0.00034 0.002334 0.001027 -0.00029d 0.000607 -0.00015 -0.0029 -0.00291 0.000372i -0.0003 0.000668 -0.0017 -0.00329 0.001774r 0.000312 0.000082 0.001669 0.001528 0.000812aww 0.000498 -0.00028 0.000783 -0.00169 0.001741ur -0.00074 -0.00104 -0.00085 0.000141 -0.00098he -1.4E-05 0.000839 0.00104 0.002212 -0.00123np 7.17E-07 0.000167 -1.1E-05 -5.3E-05 -0.00114cu -2.7E-05 7.19E-05 -0.00034 0.001853 -0.0019bi -0.00139 0.001003 0.001557 0.001198 0.000463cc -0.00049 0.000734 -2.4E-05 -0.0019 0.001007pi 0.000381 -0.0007 0.001375 -0.00031 -0.00029

Rt = βkSk,t + εt