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The early news catches the attention: On the relative price impact of similar economic indicators

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  • Hess, Dieter
  • Niessen, Alexandra

Abstract

There is strong evidence that macroeconomic releases influence prices in financial markets. However, why do markets react to some announcements while they ignore others with a similar content? Based on a Bayesian learning model, we show that market impact is mainly determined by information quality and timeliness of a release. To test the model's implications, we analyze the successive introduction of the two largest German business surveys: the well-known IFO index and the recently introduced ZEW economic indicator. In line with the model's prediction, we find a diminishing market impact of the IFO index after the ZEW indicator was introduced.

Suggested Citation

  • Hess, Dieter & Niessen, Alexandra, 2007. "The early news catches the attention: On the relative price impact of similar economic indicators," CFR Working Papers 07-03, University of Cologne, Centre for Financial Research (CFR).
    • Handle: RePEc:zbw:cfrwps:0703
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    References listed on IDEAS

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    More about this item

    Keywords

    Bayesian Learning; Macroeconomic Announcements; Information Processing;
    All these keywords.

    JEL classification:

    • 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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