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News Events and Price Movements. Price Effects of Economic and Non-Economic Publications in the News Media

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Author Info
Thomas Schuster (Leipzig University)

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Abstract

Numerous empirical studies have demonstrated that asset prices react rapidly, if at all, to news published in the mass media. In many cases, the information has been discounted and prices have already moved upon primary publication through news wires, press releases or firm announcements. Any remaining information is usually quickly priced in after dissemination through the mass media. But not always: Often enough delayed price adjustments, underreactions as well as overreactions, can be observed after particular news reports have been published. This points to inadequacies in the efficient markets hypothesis as well as in Behavioral Finance theories: Delayed reactions appear too often to be explained away as "anomalies" within models of rational pricing. But they appear too eratically to be explained as "normalities" such as in newer models of systematically irrational pricing. In other words: Asset prices frequently do not react to news published in the media. Sometimes they do. The evidence leads to the following conclusion: That markets can be efficient and inefficient at the same time.

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Paper provided by EconWPA in its series Finance with number 0305009.

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Length: 34 pages
Date of creation: 30 May 2003
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Handle: RePEc:wpa:wuwpfi:0305009

Note: Type of Document - ; prepared on PC; pages: 34
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Web page: http://129.3.20.41

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Find related papers by JEL classification:
G00 - Financial Economics - - General - - - General
G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
G12 - Financial Economics - - General Financial Markets - - - Asset Pricing
G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies
G19 - Financial Economics - - General Financial Markets - - - Other
M41 - Business Administration and Business Economics; Marketing; Accounting - - Accounting - - - Accounting

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