Risk Preferences and the Macro Announcement Premium
Abstract
In this lecture, the speaker will present a revealed preference theory for the equity premium around macroeconomic announcements. Stock returns realized around pre-scheduled macroeconomic announcements, such as the employment report and the Federal Open Market Committee statements, account for 55% of the market equity premium. The speaker will provide a characterization theorem for the set of intertemporal preferences that generate a positive announcement premium. This theory establishes that the announcement premium identifies a significant deviation from time separable expected utility and provides asset-market-based evidence for a large class of non-expected models. The results provide conditions, under which asset prices may rise prior to some macro-announcements and exhibit a pre-announcement drift.
About the speaker
Prof. Ai Hengjie received his PhD in Economics from University of Minnesota in 2006. He then joined Duke University as an Assistant Professor and returned to University of Minnesota in 2012, where he is currently an Associate Professor of Finance.
Prof. Ai’s research focuses on asset pricing, corporate finance, and macroeconomic theory. His research is published in top journals such as Journal of Finance, Journal of Financial Economics, and Review of Financial Studies.
