Risk Preferences and the Macroeconomic Announcement Premium

Risk Preferences and The Macro Announcement Premium

The paper develops a theory for 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 during the 1961-2014 period, and virtually 100% of it during the later period of 1997-2014, where more announcement data are available. We pr...

Earnings Announcement Premium and Information Ambiguity

In today's investment world there is emphasis on the role of accounting information. Behavioral factors always play an important role in financial markets. All investors are not rational and their demand for riskiness of assets is influenced by their beliefs and feelings. Optimism, pessimism, self-confidence, ambiguity-aversion, etc. help changing the manner of decision-making process over time...

The world market risk premium and U.S. macroeconomic announcements

Conditional tests of the International CAPM in previous studies (e.g., Harvey, 1991) help identify predictability but not causality. In this paper, we take an event-study approach to examine if the world market risk premium is particularly higher on prescheduled USmacroeconomic announcement days. Empirically, we apply the Savor andWilson (2014) methodology to daily US stocks as well as foreign ...

The Size Premium: What Role Does Macroeconomic Risk Play?

Premium auctions and risk preferences: An experimental study

In premium auctions, the highest losing bidder receives a reward from the seller. This paper studies the English premium auction (EPA) for the canonical case of symmetric private values with risk averse and risk loving bidders. We explicitly derive the symmetric equilibrium for bidders with CARA utilities and conduct an experimental study to test the theoretical predictions. In our experiment, ...