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 Hengjie Ai 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.

For attendees’ attention

The seminar is free and open to all. Seating is on a first come, first served basis.

HKUST Jockey Club Institute for Advanced Study
Enquiries: ias@ust.hk / 2358 5912
http://ias.ust.hk