News and Asset Pricing: A High-Frequency Anatomy of the SDF

Utilizing real-time newswire data, together with a robustly estimated intraday stochastic discount factor (SDF), we identify and quantify the economic news that is priced. News related to monetary policy and finance on average accounts for most of the variation in the SDF, followed by news about international affairs and macroeconomic data. We also document nontrivial temporal variation in the relative importance of the news, along with marked differences in the estimated news risk premiums in the “factor zoo.” To further highlight the economic mechanisms at work, we associate the different news effects with interest rate, growth, and risk premium shocks.