Working Paper: CEPR ID: DP9388
Authors: Refet S. Grkaynak; Jonathan H. Wright
Abstract: We discuss the use of event studies in macroeconomics and finance, arguing that many important macro-finance questions can only be answered using event studies with high-frequency financial market data. We provide a broad picture of the use of event studies, along with their limitations. As examples, we study financial markets' responses to specific events that help address questions such as the slope of bond demand functions and the efficacy of central bank liquidity programs. We also study the change in financial market responses to news in payrolls and unemployment in response to former Fed Chairman Greenspan's statement that payrolls are more informative.
Keywords: bond markets; event study; high-frequency data
JEL Codes: E43; E52; E58; G12; G14
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| economic news releases (E60) | asset prices (G19) |
| monetary policy announcements (E60) | asset prices (G19) |
| central bank liquidity programs (E58) | financial market reactions (G19) |
| news announcements (E60) | market behavior (D40) |
| variance of asset prices around news announcements (G14) | news component (Y60) |