Implied Higher Moments of the Returns Prior to Macroeconomic Events

This paper investigated relationship between high-order moments and future returns. We found that there is a positive relationship between volatility, skewness, kurtosis and returns. We also looked at predictability of moments when portfolios are rebalanced before Macroeconomic events. We consider as Macroeconomic events monthly releases of Employment situation, PPI and CPI. We compare returns if rebalancing occurs before these events and before some Non-announcement date. We find some evidence that rebalancing before Macroeconomic events, in particular before release of Employment situation, leads to greater returns in certain cases. The major explanation for the fact that returns are greater for Employment report than for other rebalancing strategies is due to importance of timing to investors. Our major contribution is finding that Macroeconomic events matter for investors who returns with particular moments characteristics.