We study the effect of the business cycle on optimal capital structure choice and the benefit to leverage. We propose a regime switching model with a state-dependent cash flow process to capture macroeconomic risk in a firm's cash flow. Our model is parsimonious but still realistic and allows...

This paper delineates the simultaneous impact of non-anticipated information on mean and variance of the intraday return process by including appropriate variables accounting for the news flow into both the mean and the variance function. This allows us to differentiate between the consistent...

There is strong evidence that macroeconomic releases influence prices in financial markets. However, why do markets react to some announcements while they ignore others with a similar content? Based on a Bayesian learning model, we show that market impact is mainly determined by information...

An important claim of Bayesian learning and a standard assumption in price discovery models is that the strength of the price impact of unanticipated information depends on the precision of the news. In this paper, we test for this assumption by analyzing intra-day price responses of CBOT T-bond...

We analyze how markets adjust to new information when the reliability of news is uncertain and has to be estimated itself. We propose a Bayesian learning model where market participants receive fundamental information along with noisy estimates of news' precision. It is shown that the efficiency...

Bayesian learning provides a core concept of information processing in financialmarkets. Typically it is assumed that market participants perfectly know the qual-ity of released news. However, in practice, news’ precision is rarely disclosed. Therefore, we extend standard Bayesian learning...

This paper investigates the intraday response of T-bond futures pricesto surprises in headline figures of U.S. macroeconomic reports. Analyzing thetime series properties and the information content of the macroeconomic newsflow, the paper seeks an answer to the question, what determines the...

This paper delineates the simultaneous impact of non-anticipated information onmean and variance of the intraday return process by including appropriate variablesaccounting for the news flow into both the mean and the variance function. This allowsus to differentiate between the consistent price...

We study the impact of the arrival of macroeconomic news on the informational and noise-driven components in high-frequency quote processes and their conditional variances. Bid and ask returns are decomposed into a common ("efficient return") factor and two market-side-specific components...

Bayesian learning provides a core concept of information processing in financial markets. Typically it is assumed that market participants perfectly know the quality of released news. However, in practice, news' precision is rarely disclosed. Therefore, we extend standard Bayesian learning...