Stock Prices and Economic News / Douglas K. Pearce, V. Vance Roley.

By:

Pearce, Douglas K

Contributor(s):

Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w1296.Publication details: Cambridge, Mass. National Bureau of Economic Research 1984.Description: 1 online resource: illustrations (black and white)Subject(s):

E - Macroeconomics and Monetary Economics

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Abstract: This paper examines the daily response of stock prices to announcements about the money supply, inflation, real economic activity, and the discountrate. Except for the discount rate, survey data on market participants' expectations of these announcements are used to identify the unexpected component of the announcements in order to test the efficient markets hypothesis that only the unexpected part of any announcement, the surprise,moves stock prices. The empirical results support this hypothesis and indicate further that surprises related to monetary policy significantly affect stock prices. There is only limited evidence of an impact from inflation surprises and no evidence of an impact from real activity surprises on the announcement days. There is also only weak evidence of stock price responses to surprises beyond the announcement day.

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Item type	Home library	Collection	Call number	Status	Date due	Barcode	Item holds
Working Paper	Biblioteca Digital	Colección NBER	nber w1296 (Browse shelf(Opens below))	Not For Loan

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Previous	nber w12957 Inflation Illusion, Credit, and Asset Pricing /	nber w12958 Projecting Behavioral Responses to the Next Generation of Retirement Policies /	nber w12959 A Theory of Liquidity and Regulation of Financial Intermediation /	nber w1296 Stock Prices and Economic News /	nber w12960 Schools and Location: Tiebout, Alonso, and Government Policy /	nber w12961 Incomplete Cost Pass-Through Under Deep Habits /	nber w12962 Do Bonds Span Volatility Risk in the U.S. Treasury Market? A Specification test for Affine Term Structure Models /	Next

March 1984.

This paper examines the daily response of stock prices to announcements about the money supply, inflation, real economic activity, and the discountrate. Except for the discount rate, survey data on market participants' expectations of these announcements are used to identify the unexpected component of the announcements in order to test the efficient markets hypothesis that only the unexpected part of any announcement, the surprise,moves stock prices. The empirical results support this hypothesis and indicate further that surprises related to monetary policy significantly affect stock prices. There is only limited evidence of an impact from inflation surprises and no evidence of an impact from real activity surprises on the announcement days. There is also only weak evidence of stock price responses to surprises beyond the announcement day.