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​Risk Preferences and The Macro Announcement Premium

Published on: 14-Nov-2017
14-Nov-2017 1030hrs - 1200hrs
VENUE: Executive Seminar Room 5 (S3.1-B1-07)
Contact Information:

Florence Cher <AMLCher@ntu.edu.sg> ​


This paper develops a revealed preference theory for the equity premium around macroeconomic announcements. Stock returns realized around pre-scheduled macroeconomic announcements, such as the employment report and the FOMC statements, account for 55% of the market equity premium.

​Abstract

This paper develops a revealed preference theory for the equity premium around macroeconomic announcements. Stock returns realized around pre-scheduled macroeconomic announcements, such as the employment report and the FOMC statements, account for 55% of the market equity premium. We provide a characterization theorem for the set of intertemporal preferences that generate a positive announcement premium. Our theory establishes that the announcement premium identifies a significant deviation from timeseparable expected utility and provides asset-market-based evidence for a large class of nonexpected models. Our results provide conditions under which asset prices may rise prior to some macro-announcements and exhibit a pre-announcement drift.


About the speaker

Hengjie Ai is an Associate Professor in Finance at the Carlson School of Management, University of Minnesota. Prior to joining the University of Minnesota, he was an assistant professor at the Fuqua School of Business, Duke University.  Hengjie conducts research on asset pricing, corporate finance, and macroeconomic theory.  His research is published in top journals such as the Journal of Finance, the Journal of Financial Economics, and the Review of Financial Studies. Hengjie holds a PhD in Economics from University of Minnesota. His research interest is in Finance, Macroeconomics and Economic Theory.
 
 
For registration, further information and enquiries, please contact Florence at amlcher@ntu.edu.sg or telephone: 6790 6354.


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