Get 20M+ Full-Text Papers For Less Than $1.50/day. Start a 14-Day Trial for You or Your Team.

Learn More →

Are hedge fund returns affected by media coverage of macroeconomic news?

Are hedge fund returns affected by media coverage of macroeconomic news? Extant literature suggests that the difficulty associated with the interpretation of macroeconomic news announcements by the market in general in different economic environments, might be the reason why most studies do not find any significant relationship between real-sector macroeconomic variables and financial asset returns. This paper aims to use a different approach to measure macroeconomic news. The objective is to examine if a different measure of a macroeconomic news variable, constructed from media coverage of the same, significantly affects hedge fund returns.Design/methodology/approachThe authors use a news index for unemployment, which is a real-sector variable, constructed from newspaper coverage of unemployment announcements and examine its impact on hedge fund returns.FindingsContrary to the other studies that examine the impact of macroeconomic news on hedge fund returns, the authors find that media coverage of unemployment news announcements significantly affects hedge fund returns.Practical implicationsOverall, this paper demonstrates that the manner in which the market interprets macroeconomic news announcements in different economic environments is probably a more relevant factor for hedge funds and is more likely to impact hedge fund returns. In conjunction with variables – constructed from media coverage of unemployment news announcements – that factor in the manner of interpretation, it is found that surprises also matter for hedge fund returns. This is an important consideration for hedge fund managers as well.Originality/valueTo the best of the authors’ knowledge, this is the first study that examines the impact of media coverage of macroeconomic news announcements on hedge fund returns and finds significantly different results with real-sector macro variables. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Studies in Economics and Finance Emerald Publishing

Are hedge fund returns affected by media coverage of macroeconomic news?

Dutta, Sandip; Thorson, James
Studies in Economics and Finance , Volume 36 (3): 13 – Aug 8, 2019
Download PDF
13 pages

Loading next page...
 
/lp/emerald-publishing/are-hedge-fund-returns-affected-by-media-coverage-of-macroeconomic-txGAhsmmxD
Publisher
Emerald Publishing
Copyright
© Emerald Publishing Limited
ISSN
1086-7376
DOI
10.1108/sef-10-2017-0289
Publisher site
See Article on Publisher Site

Abstract

Extant literature suggests that the difficulty associated with the interpretation of macroeconomic news announcements by the market in general in different economic environments, might be the reason why most studies do not find any significant relationship between real-sector macroeconomic variables and financial asset returns. This paper aims to use a different approach to measure macroeconomic news. The objective is to examine if a different measure of a macroeconomic news variable, constructed from media coverage of the same, significantly affects hedge fund returns.Design/methodology/approachThe authors use a news index for unemployment, which is a real-sector variable, constructed from newspaper coverage of unemployment announcements and examine its impact on hedge fund returns.FindingsContrary to the other studies that examine the impact of macroeconomic news on hedge fund returns, the authors find that media coverage of unemployment news announcements significantly affects hedge fund returns.Practical implicationsOverall, this paper demonstrates that the manner in which the market interprets macroeconomic news announcements in different economic environments is probably a more relevant factor for hedge funds and is more likely to impact hedge fund returns. In conjunction with variables – constructed from media coverage of unemployment news announcements – that factor in the manner of interpretation, it is found that surprises also matter for hedge fund returns. This is an important consideration for hedge fund managers as well.Originality/valueTo the best of the authors’ knowledge, this is the first study that examines the impact of media coverage of macroeconomic news announcements on hedge fund returns and finds significantly different results with real-sector macro variables.

Journal

Studies in Economics and Finance – Emerald Publishing

Published: Aug 8, 2019

Keywords: Finance; Financial economics

References

  • The effects of macroeconomic news announcements during the global financial crisis
    Abad, P.; Chulia, H.
  • Deutsche-mark dollar volatility: intraday activity patterns, macroeconomic announcements and longer run dependencies
    Andersen, T.G.; Bollerslev, T.
  • Micro effects of macro announcements: real-time price discovery in foreign exchange
    Andersen, T.G.; Bollerslev, T.; Diebold, F.X.; Vega, C.
  • Real-time price discovery in global stock, bond and foreign exchange markets
    Andersen, T.G.; Bollerslev, T.; Diebold, F.X.; Vega, C.
  • Do hedge funds exposures to risk factors predict their future returns?
    Bali, T.G.; Brown, S.J.; Caglayan, M.O.
  • Systematic risk and the cross section of hedge fund returns
    Bali, T.G.; Brown, S.J.; Caglayan, M.O.
  • Macroeconomic risk and hedge fund returns
    Bali, T.G.; Brown, S.J.; Caglayan, M.O.
  • The effect of macroeconomic news on stock returns: new evidence from newspaper coverage
    Birz, G.; Lott, J.R.
  • The stock market’s reaction to unemployment news: why bad news is usually good for stocks
    Boyd, J.H.; Hu, J.; Jagannathan, R.
  • Stock returns and the term structure
    Campbell, J.Y.
  • On the persistence in mutual fund performance
    Carhart, M.M.
  • An exploratory investigation of the firm size effect
    Chan, K.C.; Chen, N.F.; Hsieh, D.A.
  • The risk and return from factors
    Chan, K.C.; Karceski, J.; Lakonishok, J.
  • Financial investment opportunities and the macroeconomy
    Chen, N.F.
  • The money supply announcements puzzle: review and interpretation
    Cornell, B.
  • Journalists and the stock market
    Dougal, C.; Engelberg, J.; Garcia, D.; Parsons, C.A.
  • Common risk factors in the returns on stocks and bonds
    Fama, E.E.; French, K.R.
  • Macroeconomic factors do influence aggregate stock returns
    Flannery, M.J.; Protopapadakis, A.A.
  • The risk in hedge fund strategies: theory and evidence from trend followers
    Fung, W.; Hsieh, D.A.
  • Hedge fund benchmarks: a risk-based approach
    Fung, W.; Hsieh, D.A.
  • Why do markets react badly to good news? evidence from fed funds futures
    Ghent, A.C.
  • Macroeconomic surprises and stock returns in South Africa
    Gupta, R.; Reid, M.
  • Response of hourly stock prices and trading volume to economic news
    Jain, P.C.
  • Jumps, cojumps and macro announcements
    Lahaye, J.; Laurent, S.; Neely, C.J.
  • Is newspaper coverage of economic events politically biased?
    Lott, J.R.; Hassett, K.A.
  • Stock prices, news and business conditions
    McQueen, G.; Roley, V.V.
  • The impact of public information on the stock market
    Mitchell, M.L.; Mulherin, J.H.
  • The reaction of stock prices to unanticipated changes in money: a note
    Pearce, D.K.; Roley, V.V.
  • Stock prices and economic news
    Pearce, D.K.; Roley, V.V.
  • Surprise volume and heteroscedasticity in equity returns
    Wagner, N.; Marsh, T.A.