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Macroeconomic News and Stock Returns in the United States and Germany

  • Norbert Funke
  • Akimi Matsuda

Using daily data for the January 1997 to June 2002 period, we analyze the impact of a broad set of macroeconomic news on stock prices in the United States and Germany. With GARCH specifications we test five hypotheses and find that news on real economic activity has a significant impact on stock prices. The effects vary between different types of stocks and depend on the state of the economy. In a boom period, bad economic news may be good news for stock prices. For German stock prices, international news is at least as important as domestic news. The analysis of bihourly data suggests that the main effect occurs within a short period of time.

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Paper provided by International Monetary Fund in its series IMF Working Papers with number 02/239.

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Length: 30
Date of creation: 01 Dec 2002
Date of revision:
Handle: RePEc:imf:imfwpa:02/239
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  1. repec:imf:imfwpa:98/79 is not listed on IDEAS
  2. John H. Boyd & Jian Hu & Ravi Jagannathan, 2005. "The Stock Market's Reaction to Unemployment News: Why Bad News Is Usually Good for Stocks," Journal of Finance, American Finance Association, vol. 60(2), pages 649-672, 04.
  3. Alan B. Krueger, 1996. "Do Markets Respond More to More Reliable Labor Market Data? A Test of Market Rationality," NBER Working Papers 5769, National Bureau of Economic Research, Inc.
  4. 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.
  5. David M. Cutler & James M. Poterba & Lawrence H. Summers, 1988. "What Moves Stock Prices?," NBER Working Papers 2538, National Bureau of Economic Research, Inc.
  6. Michael J. Fleming & Eli M. Remolona, 1999. "The term structure of announcement effects," Staff Reports 76, Federal Reserve Bank of New York.
  7. Nelson, Daniel B, 1991. "Conditional Heteroskedasticity in Asset Returns: A New Approach," Econometrica, Econometric Society, vol. 59(2), pages 347-70, March.
  8. Rapach, David E., 2001. "Macro shocks and real stock prices," Journal of Economics and Business, Elsevier, vol. 53(1), pages 5-26.
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