Missing Events in Event Studies: Identifying the Effects of Partially-Measured News Surprises

Abstract

We are grateful to Eric Swanson and many seminar and conference participants for helpful comments on an earlier draft. We thank Yunus Can Aybaş and Cem Tütüncü for outstanding research assistance. The code that implements the econometric procedures described in this paper is available in a user-friendly form on the authors' web pages. Gürkaynak's research was supported by funding from the European Research Council (ERC) under the European Union's Horizon 2020 research and innovation program (grant agreement No 726400). All errors are our sole responsibility. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research. NBER working papers are circulated for discussion and comment purposes. They have not been peer-reviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.

Delphic and Odyssean Monetary Policy Shocks: Evidence from the Euro Area

“…Gürkaynak et al (2005b) and Nakamura and Steinsson (2018) show that some properties of market reaction to high-frequency data are consistent with the signaling channel of monetary policy (Ellingsen and Söderstom 2001, Melosi 2017, Tang 2015. Gürkaynak, Kısacıkoglu and Wright (2018) emphasize that markets extract several dimensions from macroeconomic news such as monetary policy announcements. We explicitly decompose high-frequency surprises into information about the macroeconomic outlook (Delphic) and information about future monetary policy shocks (Odyssean) and show that the information component is quite substantial.…”

Do Monetary Policy Announcements Affect Exchange Rate Returns and Volatility of Returns? Some Evidence from High‐Frequency Intra‐Day South African Data

“…Gürkaynak et al . () argue that macroeconomic news announcements are complex and multi‐dimensional, and that measuring surprises in terms of headline numbers and survey expectations for these numbers provides only a partial measure. In their view, the remaining news in the release is unobservable to the econometrician, but nevertheless important, and helps explain this tendency.…”

The long-run information effect of central bank communication

“…The finding that there is market news in the narrative of central bank communication is of independent interest and another contribution of the paper. Most studies of central bank communication that analyze their content focus on numerical information, but there is evidence that some other factor is needed to explain the full market reaction around communication events (Gürkaynak et al 2018). We find it natural to view narrative as an important aspect of this 'missing' information in event studies, and the approaches we develop are more broadly relevant to the literature.…”

“…Given the popularity of event studies in the monetary policy literature, and the preponderance of text that accompanies many central bank communication events, the methods we propose have broad applicability. For example, Gürkaynak et al (2018) find that the change in interest rates around central bank communication events in the US is only partially captured by headline numeric information. Our approach allows researchers to directly analyze the 'missing' information not accounted for in traditional analysis.…”