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Stock Prices, News, and Business Conditions

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  • McQueen, Grant
  • Roley, V Vance
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    Abstract

    Previous research finds that fundamental macroeconomic news has little effect on stock prices. We show that after allowing for different stages of the business cycle, a stronger relationship between stock prices and news is evident. In addition to stock prices, we examine the effect of real activity news on proxies for expected cash flows and equity discount rates. We find that when the economy is strong the stock market responds negatively to news about higher real economic activity. This negative relation is caused by the larger increase in discount rates relative to expected cash flows. Article published by Oxford University Press on behalf of the Society for Financial Studies in its journal, The Review of Financial Studies.

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    Bibliographic Info

    Article provided by Society for Financial Studies in its journal Review of Financial Studies.

    Volume (Year): 6 (1993)
    Issue (Month): 3 ()
    Pages: 683-707

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    Handle: RePEc:oup:rfinst:v:6:y:1993:i:3:p:683-707

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