Announcements, Expectations, and Stock Returns with Asymmetric Information



Revisions of consensus forecasts of macroeconomic variables positively predict announcement

day forecast errors, whereas stock market returns on forecast revision days predict announcement day returns in the opposite direction. A dynamic noisy rational expectations model with periodic macroeconomic announcements quantitatively accounts for these findings. Under asymmetric information, average beliefs are not Bayesian: they underweight new information and positively predict subsequent belief errors. In addition, stock prices are partly driven by noise, and therefore negatively predict returns on announcement days when noise is revealed and the market corrects itself.

In case you would like to attend this online job market seminar please contact Myra Lissenberg to receive the login details for the seminar.