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News Events and Price Movements. Price Effects of Economic and Non-Economic Publications in the News Media

  • Thomas Schuster

    (Leipzig University)

Numerous empirical studies have demonstrated that asset prices react rapidly, if at all, to news published in the mass media. In many cases, the information has been discounted and prices have already moved upon primary publication through news wires, press releases or firm announcements. Any remaining information is usually quickly priced in after dissemination through the mass media. But not always: Often enough delayed price adjustments, underreactions as well as overreactions, can be observed after particular news reports have been published. This points to inadequacies in the efficient markets hypothesis as well as in Behavioral Finance theories: Delayed reactions appear too often to be explained away as "anomalies" within models of rational pricing. But they appear too eratically to be explained as "normalities" such as in newer models of systematically irrational pricing. In other words: Asset prices frequently do not react to news published in the media. Sometimes they do. The evidence leads to the following conclusion: That markets can be efficient and inefficient at the same time.

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Paper provided by EconWPA in its series Finance with number 0305009.

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Length: 34 pages
Date of creation: 30 May 2003
Date of revision:
Handle: RePEc:wpa:wuwpfi:0305009
Note: Type of Document - ; prepared on PC; pages: 34
Contact details of provider: Web page: http://econwpa.repec.org

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