Impact of Macroeconomic Announcements on US Equity Prices : 2009-2013

We examine returns of several US equity ETFs on the days of 18 major macroeconomic announcements for the period of January 2009 – July 2013. The ARMA GARCH model with external regression terms that describe announcement events and their surprises is used. We find that ISM Manufacturing Reports, Non-Farm Payrolls, International Trade Balance, Index of Leading Indicators, Housing Starts, Jobless Claims are the most significant factors in our model. We compare performance of the buy-and-hold strategy (B&H) with three strategies that realize daily returns on the macroeconomic announcement days. Namely, we choose:a) Realized returns on the announcement days of all 18 macroeconomic indicators (Model #18).b) Realized returns on the days of announcements of those indicators whose regression coefficients have statistical significance with p-value < 0.05 (Model p5).c) Realized returns on the days of announcements of those indicators whose regression coefficients have statistical significance with p-value < 0.25 (Model p25)We find that the mean daily returns of Model #18 are at least 30% higher than those of B&H; yet their differences are not statistically significant (p-value > 0.6). Mean daily returns for Model p5 are dramatically higher than that of Model #18 and have better statistical significance than that of B&H. However, compound returns for Model p5 may be lower than those of Model #18 and even lower than those of B&H due to the bull nature of the market during 2009 – 2013 and due to relatively small numbers of days when the Model p5 invested money in the market. Yet relatively short exposure to the market risk can yield a better effective Sharpe ratio for Model p5 than that of for B&H