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Media Coverage and Macroeconomic Information Processing

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  • Alexandra Niessen

Abstract

This paper investigates how media coverage influences macroeconomic information processing at the bond market. I provide evidence that a high media coverage of an economic topic increases investor attention prior to the release of the corresponding economic indicator: High media coverage of the business cycle leads to a stronger market reaction to the release of gross domestic product, industrial production and IFO business index than low media coverage. High media coverage of the price level increases the market reaction to the release of producer and consumer price index than low media coverage. High media coverage of unemployment leads to a stronger market reaction to the release of the unemployment rate than low media coverage.

Suggested Citation

  • Alexandra Niessen, 2007. "Media Coverage and Macroeconomic Information Processing," SFB 649 Discussion Papers SFB649DP2007-011, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
  • Handle: RePEc:hum:wpaper:sfb649dp2007-011
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    File URL: http://sfb649.wiwi.hu-berlin.de/papers/pdf/SFB649DP2007-011.pdf
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    References listed on IDEAS

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    1. Norbert Funke & Akimi Matsuda, 2006. "Macroeconomic News and Stock Returns in the United States and Germany," German Economic Review, Verein für Socialpolitik, vol. 7, pages 189-210, May.
    2. Hautsch, Nikolaus & Hess, Dieter, 2007. "Bayesian Learning in Financial Markets: Testing for the Relevance of Information Precision in Price Discovery," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 42(01), pages 189-208, March.
    3. Ray C. Fair, 2002. "Events That Shook the Market," The Journal of Business, University of Chicago Press, vol. 75(4), pages 713-732, October.
    4. Mitchell, Mark L & Mulherin, J Harold, 1994. " The Impact of Public Information on the Stock Market," Journal of Finance, American Finance Association, vol. 49(3), pages 923-950, July.
    5. Matthew Gentzkow & Jesse M. Shapiro, 2006. "Media Bias and Reputation," Journal of Political Economy, University of Chicago Press, vol. 114(2), pages 280-316, April.
    6. Ederington, Louis H & Lee, Jae Ha, 1993. " How Markets Process Information: News Releases and Volatility," Journal of Finance, American Finance Association, vol. 48(4), pages 1161-1191, September.
    7. Balduzzi, Pierluigi & Elton, Edwin J. & Green, T. Clifton, 2001. "Economic News and Bond Prices: Evidence from the U.S. Treasury Market," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 36(04), pages 523-543, December.
    8. Gur Huberman, 2001. "Contagious Speculation and a Cure for Cancer: A Nonevent that Made Stock Prices Soar," Journal of Finance, American Finance Association, vol. 56(1), pages 387-396, February.
    9. McQueen, Grant & Roley, V Vance, 1993. "Stock Prices, News, and Business Conditions," Review of Financial Studies, Society for Financial Studies, vol. 6(3), pages 683-707.
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    More about this item

    Keywords

    Media Coverage; Information Processing; Economic Indicators.;

    JEL classification:

    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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