Macroeconomic News and Stock Returns in the United States and Germany

December 1, 2002

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.

Subject: Asset prices, Consumer prices, Financial institutions, Financial markets, Prices, Producer prices, Stock markets, Stocks

Keywords: asset price development, Asset prices, consumer confidence, Consumer prices, Europe, interest rate news, macroeconomic news, Nasdaq index, price index, price reaction, producer price, Producer prices, S&P 500, Stock markets, stock price, Stocks, WP

Pages:
30
Volume:
2002
DOI:
https://doi.org/10.5089/9781451875782.001
Issue:
239
Series:
Working Paper No. 2002/239
Stock No:
WPIEA2392002
ISBN:
9781451875782
ISSN:
1018-5941

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