IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this paper

Stock Prices and Economic News

  • Douglas K. Pearce
  • V. Vance Roley

This paper examines the daily response of stock prices to announcements about the money supply, inflation, real economic activity, and the discountrate. Except for the discount rate, survey data on market participants' expectations of these announcements are used to identify the unexpected component of the announcements in order to test the efficient markets hypothesis that only the unexpected part of any announcement, the surprise,moves stock prices. The empirical results support this hypothesis and indicate further that surprises related to monetary policy significantly affect stock prices. There is only limited evidence of an impact from inflation surprises and no evidence of an impact from real activity surprises on the announcement days. There is also only weak evidence of stock price responses to surprises beyond the announcement day.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.nber.org/papers/w1296.pdf
Download Restriction: no

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 1296.

as
in new window

Length:
Date of creation: Mar 1984
Date of revision:
Publication status: published as Pearce, Douglas K. and V. Vance Roley. "Stock Prices an Economic News." Journal of Business, Vol. 58, No. 1, (January 1985), pp. 49-67.
Handle: RePEc:nbr:nberwo:1296
Note: ME
Contact details of provider: Postal:
National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.

Phone: 617-868-3900
Web page: http://www.nber.org
Email:


More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. 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 344-54, August.
  2. Shiller, Robert J, 1973. "Rational Expectations and the Term Structure of Interest Rates: Comment," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 5(3), pages 856-60, August.
  3. Castanias, Richard P, II, 1979. "Macroinformation and the Variability of Stock Market Prices," Journal of Finance, American Finance Association, vol. 34(2), pages 439-50, May.
  4. Grossman, Jacob, 1981. "The "Rationality" of Money Supply Expectations and the Short-Run Response of Interest Rates to Monetary Surprises," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 13(4), pages 409-24, November.
  5. Modigliani, Franco & Shiller, Robert J, 1973. "Inflation, Rational Expectations and the Term Structure of Interest Rates," Economica, London School of Economics and Political Science, vol. 40(157), pages 12-43, February.
  6. Martin Feldstein, 1979. "Inflation, Tax Rules, and the Stock Market," NBER Working Papers 0403, National Bureau of Economic Research, Inc.
  7. Pearce, Douglas K & Roley, V Vance, 1983. " The Reaction of Stock Prices to Unanticipated Changes in Money: A Note," Journal of Finance, American Finance Association, vol. 38(4), pages 1323-33, September.
  8. Cornell, Bradford, 1983. "Money Supply Announcements and Interest Rates: Another View," The Journal of Business, University of Chicago Press, vol. 56(1), pages 1-23, January.
  9. 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.
  10. Lawrence H. Summers, 1981. "Inflation and the Valuation of Corporate Equities," NBER Working Papers 0824, National Bureau of Economic Research, Inc.
  11. Urich, Thomas & Wachtel, Paul, 1981. "Market Response to the Weekly Money Supply Announcements in the 1970s," Journal of Finance, American Finance Association, vol. 36(5), pages 1063-72, December.
  12. Mullineaux, Donald J, 1978. "On Testing for Rationality: Another Look at the Livingston Price Expectations Data," Journal of Political Economy, University of Chicago Press, vol. 86(2), pages 329-36, April.
  13. Martin Feldstein, 1978. "Inflation and the Stock Market," NBER Working Papers 0276, National Bureau of Economic Research, Inc.
  14. Schwert, G William, 1981. "The Adjustment of Stock Prices to Information about Inflation," Journal of Finance, American Finance Association, vol. 36(1), pages 15-29, March.
  15. Lloyd-Davies, Peter & Canes, Michael, 1978. "Stock Prices and the Publication of Second-Hand Information," The Journal of Business, University of Chicago Press, vol. 51(1), pages 43-56, January.
  16. Gibbons, Michael R & Hess, Patrick, 1981. "Day of the Week Effects and Asset Returns," The Journal of Business, University of Chicago Press, vol. 54(4), pages 579-96, October.
  17. Waud, Roger N, 1970. "Public Interpretation of Federal Reserve Discount Rate Changes: Evidence on the 'Announcement Effect'," Econometrica, Econometric Society, vol. 38(2), pages 231-50, March.
  18. Pesando, James E, 1975. "A Note on the Rationality of the Livingston Price Expectations," Journal of Political Economy, University of Chicago Press, vol. 83(4), pages 849-58, August.
  19. Raymond E. Lombra & Raymond G. Torto, 1977. "Discount Rate Changes and Announcement Effects," The Quarterly Journal of Economics, Oxford University Press, vol. 91(1), pages 171-176.
  20. V. Vance Roley, 1982. "Weekly money supply announcements and the volatility of short-term interest rates," Economic Review, Federal Reserve Bank of Kansas City, issue Apr, pages 3-15.
  21. Fama, Eugene F, et al, 1969. "The Adjustment of Stock Prices to New Information," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 10(1), pages 1-21, February.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:1296. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()

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 references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.

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

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.