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News and Sectoral Comovement

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Abstract

This paper tests the existence of strategic information complementarities as a source of sectoral comovement. A theoretical model derived in Veldkamp and Wolfers (2007) explains sectoral comovement by the assumption that firms rely too much on aggregate information to make output decisions. We find empirical support for this hypothesis: news on aggregate developments, on average, affect firm's production plans significantly more than news on sector-specific developments. This result is based on a rich dataset on firm survey and media releases for Germany comprising 01/1999-07/2006.

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  • Michael J. Lamla & Sarah M. Lein & Jan-Egbert Sturm, 2007. "News and Sectoral Comovement," KOF Working papers 07-183, KOF Swiss Economic Institute, ETH Zurich.
  • Handle: RePEc:kof:wpskof:07-183
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    File URL: http://dx.doi.org/10.3929/ethz-a-005502910
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    Cited by:

    1. Paul Beaudry & Franck Portier, 2014. "News-Driven Business Cycles: Insights and Challenges," Journal of Economic Literature, American Economic Association, vol. 52(4), pages 993-1074, December.
    2. Lena Dräger, 2010. "Why don't people pay attention? Endogenous Sticky Information in a DSGE Model," Macroeconomics and Finance Series 201002, Hamburg University, Department Wirtschaft und Politik.
    3. Lena Draeger, 2010. "Why Don't People Pay Attention?," KOF Working papers 10-260, KOF Swiss Economic Institute, ETH Zurich.

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