Macroeconomic News and Stock Returns in the United States and Germany

Author/Editor:

Norbert Funke ; Akimi Matsuda

Publication Date:

December 1, 2002

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

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.

Series:

Working Paper No. 2002/239

Subject:

Asset prices Consumer prices Financial institutions Financial markets Prices Producer prices Stock markets Stocks

English

Publication Date:

December 1, 2002

ISBN/ISSN:

9781451875782/1018-5941

Stock No:

WPIEA2392002

Pages:

30

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