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The Effect of News on Bond Prices: Evidence from the United Kingdom, 1900-1920

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  • Elmendorf, Douglas W
  • Hirschfeld, Mary L
  • Weil, David N

Abstract

The authors study the relationship of news to bond prices. They select a set of major news events based solely on their significance as judged by historians and examine the corresponding bond price movements. The variance of holding returns is higher for weeks with important news than for weeks without such news, and the probability of a very large return (in absolute value) is higher for 'news' weeks than for 'non-news' weeks. The magnitude of these differences, however, suggests that much of the variability in bond prices cannot be explained by news, though important caveats about the authors' measurement of news apply. Copyright 1996 by MIT Press.

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Bibliographic Info

Article provided by MIT Press in its journal Review of Economics & Statistics.

Volume (Year): 78 (1996)
Issue (Month): 2 (May)
Pages: 341-44

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Handle: RePEc:tpr:restat:v:78:y:1996:i:2:p:341-44

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  1. John Y. Campbell & Robert J. Shiller, 1988. "Stock Prices, Earnings and Expected Dividends," NBER Working Papers 2511, National Bureau of Economic Research, Inc.
  2. Frankel, Jeff & Froot, Ken, 1986. "Using Survey Data to Test Standard Propositions Regarding Exchange Rate Expectations," Department of Economics, Working Paper Series, Department of Economics, Institute for Business and Economic Research, UC Berkeley qt1972q8wm, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
  3. Evans, Paul, 1987. "Interest Rates and Expected Future Budget Deficits in the United States," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 95(1), pages 34-58, February.
  4. Evans, Paul, 1985. "Do Large Deficits Produce High Interest Rates?," American Economic Review, American Economic Association, American Economic Association, vol. 75(1), pages 68-87, March.
  5. Roll, Richard, 1984. "Orange Juice and Weather," American Economic Review, American Economic Association, American Economic Association, vol. 74(5), pages 861-80, December.
  6. De Long, J. Bradford & Shleifer, Andrei & Summers, Lawrence H. & Waldmann, Robert J., 1990. "Noise Trader Risk in Financial Markets," Scholarly Articles 3725552, Harvard University Department of Economics.
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  8. Roley, V Vance, 1983. "The Response of Short-Term Interest Rates to Weekly Money Announcements," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 15(3), pages 344-54, August.
  9. Jeffrey A. Frankel & Richard Meese, 1987. "Are Exchange Rates Excessively Variable?," NBER Chapters, National Bureau of Economic Research, Inc, in: NBER Macroeconomics Annual 1987, Volume 2, pages 117-162 National Bureau of Economic Research, Inc.
  10. V. Vance Roley, 1982. "The Response of Short-Term Interest Rates to Weekly Money Announcements," NBER Working Papers 1001, National Bureau of Economic Research, Inc.
  11. Plosser, Charles I., 1982. "Government financing decisions and asset returns," Journal of Monetary Economics, Elsevier, Elsevier, vol. 9(3), pages 325-352.
  12. Cutler, David M & Poterba, James M & Summers, Lawrence H, 1990. "Speculative Dynamics and the Role of Feedback Traders," American Economic Review, American Economic Association, American Economic Association, vol. 80(2), pages 63-68, May.
  13. Jeffrey A. Frankel & Kenneth A. Froot, 1985. "Using Survey Data to Test Some Standard Propositions Regarding Exchange Rate Expectations," NBER Working Papers 1672, National Bureau of Economic Research, Inc.
  14. David H. Cutler & James M. Poterba & Lawrence H. Summers, 1988. "What Moves Stock Prices?," Working papers, Massachusetts Institute of Technology (MIT), Department of Economics 487, Massachusetts Institute of Technology (MIT), Department of Economics.
  15. Niederhoffer, Victor, 1971. "The Analysis of World Events and Stock Prices," The Journal of Business, University of Chicago Press, University of Chicago Press, vol. 44(2), pages 193-219, April.
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