Time-varying macroeconomic announcement risk

This paper examines an issue overlooked in the finance and economics literature: time variation in announcement volatility or event risk. To identify this, we combine long spans of high-frequency data with a flexible model of returns. The model allows us to separately identify conditional event risk from other factors like time-varying volatility, jumps and intraday periodicity, and long time spans of data are needed given the infrequency of most announcements. We focus on crude oil due to its economic importance, high volatility and complex announcement structure. Results indicate strong evidence for time-varying announcement volatility as announcement event risk varies by as much as a factor of 10 over time.