IDEAS home Printed from https://ideas.repec.org/a/tpr/restat/v78y1996i2p341-44.html
   My bibliography  Save this article

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

Author

Listed:
  • 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.

Suggested Citation

  • Elmendorf, Douglas W & Hirschfeld, Mary L & Weil, David N, 1996. "The Effect of News on Bond Prices: Evidence from the United Kingdom, 1900-1920," The Review of Economics and Statistics, MIT Press, vol. 78(2), pages 341-344, May.
    • Handle: RePEc:tpr:restat:v:78:y:1996:i:2:p:341-44
    as

    Download full text from publisher

    File URL: http://links.jstor.org/sici?sici=0034-6535%28199605%2978%3A2%3C341%3ATEONOB%3E2.0.CO%3B2-9&origin=bc
    File Function: full text
    Download Restriction: Access to full text is restricted to JSTOR subscribers. See http://www.jstor.org for details.
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. 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.
    2. Evans, Paul, 1985. "Do Large Deficits Produce High Interest Rates?," American Economic Review, American Economic Association, vol. 75(1), pages 68-87, March.
    3. Niederhoffer, Victor, 1971. "The Analysis of World Events and Stock Prices," The Journal of Business, University of Chicago Press, vol. 44(2), pages 193-219, April.
    4. Elmendorf, D.W., 1993. "Actual Budget Deficit Expectations and Interest Rates," Harvard Institute of Economic Research Working Papers 1639, Harvard - Institute of Economic Research.
    5. Campbell, John Y & Shiller, Robert J, 1988. " Stock Prices, Earnings, and Expected Dividends," Journal of Finance, American Finance Association, vol. 43(3), pages 661-676, July.
    6. Frankel, Jeffrey A & Froot, Kenneth A, 1987. "Using Survey Data to Test Standard Propositions Regarding Exchange Rate Expectations," American Economic Review, American Economic Association, vol. 77(1), pages 133-153, March.
    7. Jeffrey A. Frankel & Richard Meese, 1987. "Are Exchange Rates Excessively Variable?," NBER Chapters, in: NBER Macroeconomics Annual 1987, Volume 2, pages 117-162, National Bureau of Economic Research, Inc.
    8. Roley, V Vance, 1983. "The Response of Short-Term Interest Rates to Weekly Money Announcements," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 15(3), pages 344-354, August.
    9. Cutler, David M & Poterba, James M & Summers, Lawrence H, 1990. "Speculative Dynamics and the Role of Feedback Traders," American Economic Review, American Economic Association, vol. 80(2), pages 63-68, May.
    10. Evans, Paul, 1987. "Interest Rates and Expected Future Budget Deficits in the United States," Journal of Political Economy, University of Chicago Press, vol. 95(1), pages 34-58, February.
    11. De Long, J Bradford & Andrei Shleifer & Lawrence H. Summers & Robert J. Waldmann, 1990. "Noise Trader Risk in Financial Markets," Journal of Political Economy, University of Chicago Press, vol. 98(4), pages 703-738, August.
    12. Roll, Richard, 1984. "Orange Juice and Weather," American Economic Review, American Economic Association, vol. 74(5), pages 861-880, December.
    13. Plosser, Charles I., 1982. "Government financing decisions and asset returns," Journal of Monetary Economics, Elsevier, vol. 9(3), pages 325-352.
    14. 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.
    15. David H. Cutler & James M. Poterba & Lawrence H. Summers, 1988. "What Moves Stock Prices?," Working papers 487, Massachusetts Institute of Technology (MIT), Department of Economics.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Hanna, Alan J. & Turner, John D. & Walker, Clive B., 2017. "News media and investor sentiment over the long run," QUCEH Working Paper Series 2017-06, Queen's University Belfast, Queen's University Centre for Economic History.
    2. Amelie Brune & Thorsten Hens & Marc Rieger & Mei Wang, 2015. "The war puzzle: contradictory effects of international conflicts on stock markets," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 62(1), pages 1-21, March.
    3. David le Bris, 2018. "What is a market crash?," Economic History Review, Economic History Society, vol. 71(2), pages 480-505, May.
    4. Campbell, Gareth & Quinn, William & Turner, John D. & Ye, Qing, 2015. "What moved share prices in the nineteenth-century London stock market?," QUCEH Working Paper Series 15-06, Queen's University Belfast, Queen's University Centre for Economic History.
    5. Gareth Campbell & William Quinn & John D. Turner & Qing Ye, 2018. "What moved share prices in the nineteenth†century London stock market?," Economic History Review, Economic History Society, vol. 71(1), pages 157-189, February.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Yin-Wong Cheung & Menzie D. Chinn & Ian W. Marsh, 2004. "How do UK-based foreign exchange dealers think their market operates?," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 9(4), pages 289-306.
    2. Hommes, Cars H., 2006. "Heterogeneous Agent Models in Economics and Finance," Handbook of Computational Economics, in: Leigh Tesfatsion & Kenneth L. Judd (ed.), Handbook of Computational Economics, edition 1, volume 2, chapter 23, pages 1109-1186, Elsevier.
    3. Jacob Boudoukh & Matthew Richardson & YuQing Shen & Robert F. Whitelaw, 2003. "Do Asset Prices Reflect Fundamentals? Freshly Squeezed Evidence from the OJ Market," NBER Working Papers 9515, National Bureau of Economic Research, Inc.
    4. Barberis, Nicholas & Shleifer, Andrei & Vishny, Robert, 1998. "A model of investor sentiment," Journal of Financial Economics, Elsevier, vol. 49(3), pages 307-343, September.
    5. Boudoukh, Jacob & Richardson, Matthew & Shen, YuQing (Jeff) & Whitelaw, Robert F., 2007. "Do asset prices reflect fundamentals? Freshly squeezed evidence from the OJ market," Journal of Financial Economics, Elsevier, vol. 83(2), pages 397-412, February.
    6. Cars Hommes & Florian Wagener, 2008. "Complex Evolutionary Systems in Behavioral Finance," Tinbergen Institute Discussion Papers 08-054/1, Tinbergen Institute.
    7. repec:ams:ndfwpp:02-07 is not listed on IDEAS
    8. Hommes, C.H. & Sonnemans, J. & Tuinstra, J. & Velden, H. van de, 2004. "Coordination of Expectations in Asset Pricing Experiments (Version March 2004)," CeNDEF Working Papers 04-02, Universiteit van Amsterdam, Center for Nonlinear Dynamics in Economics and Finance.
    9. Cho, Guedae & Kim, MinKyoung & Koo, Won W., 2003. "Relative Agricultural Price Changes In Different Time Horizons," 2003 Annual meeting, July 27-30, Montreal, Canada 22249, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    10. Elmendorf, Douglas W. & Gregory Mankiw, N., 1999. "Government debt," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 25, pages 1615-1669, Elsevier.
    11. Youwei Li & Xue-Zhong He, 2005. "Long Memory, Heterogeneity, and Trend Chasing," Computing in Economics and Finance 2005 113, Society for Computational Economics.
    12. Hirota, Shinichi & Sunder, Shyam, 2007. "Price bubbles sans dividend anchors: Evidence from laboratory stock markets," Journal of Economic Dynamics and Control, Elsevier, vol. 31(6), pages 1875-1909, June.
    13. Rudiger Dornbusch & Jeffrey Frankel, 1988. "The Flexible Exchange Rate System: Experience and Alternatives," International Economic Association Series, in: Silvio Borner (ed.), International Finance and Trade in a Polycentric World, chapter 7, pages 151-208, Palgrave Macmillan.
    14. Thomas Laubach, 2009. "New Evidence on the Interest Rate Effects of Budget Deficits and Debt," Journal of the European Economic Association, MIT Press, vol. 7(4), pages 858-885, June.
    15. Changyun Wang, 2002. "The effect of net positions by type of trader on volatility in foreign currency futures markets," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 22(5), pages 427-450, May.
    16. Sonnemans, Joep & Hommes, Cars & Tuinstra, Jan & van de Velden, Henk, 2004. "The instability of a heterogeneous cobweb economy: a strategy experiment on expectation formation," Journal of Economic Behavior & Organization, Elsevier, vol. 54(4), pages 453-481, August.
    17. Ellen, Saskia ter & Zwinkels, Remco C.J., 2010. "Oil price dynamics: A behavioral finance approach with heterogeneous agents," Energy Economics, Elsevier, vol. 32(6), pages 1427-1434, November.
    18. Daniel, Kent & Hirshleifer, David & Teoh, Siew Hong, 2002. "Investor psychology in capital markets: evidence and policy implications," Journal of Monetary Economics, Elsevier, vol. 49(1), pages 139-209, January.
    19. Xu, Juanyi, 2010. "Noise traders, exchange rate disconnect puzzle, and the Tobin tax," Journal of International Money and Finance, Elsevier, vol. 29(2), pages 336-357, March.
    20. Robert F. Engle & Martin Klint Hansen & Asger Lunde, 2012. "And Now, The Rest of the News: Volatility and Firm Specific News Arrival," CREATES Research Papers 2012-56, Department of Economics and Business Economics, Aarhus University.
    21. Diego Bastourre, 2008. "Inversores Financieros en los Mercados de Commodities: Un Modelo con Dinámica de Ajuste no Lineal al Equilibrio," Department of Economics, Working Papers 072, Departamento de Economía, Facultad de Ciencias Económicas, Universidad Nacional de La Plata.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:tpr:restat:v:78:y:1996:i:2:p:341-44. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Kelly McDougall (email available below). General contact details of provider: https://direct.mit.edu/journals .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.