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Investor reaction to simultaneous news releases: unemployment vs. earnings

Author

Listed:
  • Neeraj J. Gupta

    (Elon University)

  • Vitaliy Strohush

    (Elon University)

  • Reilly White

    (University of New Mexico)

Abstract

We examine the stock price reaction to surprises in the simultaneous releases of two types of news: macro news (captured by unemployment announcements) and corporate news (captured through earnings releases). Using financial data for the U.S. markets from 1962 to 2012, we confirm that earnings surprises and unemployment surprises significantly affect individual stock returns. Also, in line with Boyd et al. (J Bank Financ 60(2):649–672, 2005), we confirm that both surprises are significant during economic booms and contractions. However, while unemployment surprises are significant on a stand-alone basis, they are systematic events whose impact is captured within systematic risk-adjusted return models such as the Fama-French 3-factor and market models. This suggests that, for individual stocks, earnings surprises dominate unemployment surprises when dealing with simultaneous news releases. The stock market reaction to firm earnings surprises is enhanced during recessions, which can mostly be explained by systemic market functions.

Suggested Citation

  • Neeraj J. Gupta & Vitaliy Strohush & Reilly White, 2019. "Investor reaction to simultaneous news releases: unemployment vs. earnings," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 43(4), pages 735-749, October.
    • Handle: RePEc:spr:jecfin:v:43:y:2019:i:4:d:10.1007_s12197-018-9460-z
    DOI: 10.1007/s12197-018-9460-z
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    More about this item

    Keywords

    Unemployment; Earnings; Surprises; Forecasts;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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