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What Moves Stock Prices?

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Author Info
David M. Cutler
James M. Poterba
Lawrence H. Summers

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Abstract

This paper estimates the fraction of the variance in aggregate stock returns that can be attributed to various kinds of news. First, we consider macroeconomic news and show that it is difficult to explain more than one third of the return variance from this source. Second, to explore the possibility that the stock market responds to information that is omitted from our specifications, we also examine market moves coincident with major political and world events. The relatively small market responses to such news, along with evidence that large market moves often occur on days without any identifiable major news releases, casts doubt on the view that stock price movements are fully explicable by news about future cash flows and discount rates.

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Publisher Info
Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 2538.

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Date of creation: Jul 1989
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Publication status: published as The Journal of Portfolio Management, Vol. 15, No. 3, pp. 4-12, (Spring 1989).
Handle: RePEc:nbr:nberwo:2538

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This page was last updated on 2008-8-19.

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