Article1994

The Impact of Public Information on the Stock Market

549 citations0/0 files storedThe Journal of Finance

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Financial Markets and Investment Strategies Financial Risk and Volatility Modeling Market Dynamics and Volatility

Abstract

Abstract We study the relation between the number of news announcements reported daily by Dow Jones & Company and aggregate measures of securities market activity including trading volume and market returns. We find that the number of Dow Jones announcements and market activity are directly related and that the results are robust to the addition of factors previously found to influence financial markets such as day‐of‐the‐week dummy variables, news importance as proxied by large New York Times headlines and major macroeconomic announcements, and noninformation sources of market activity as measured by dividend capture and triple witching trading. However, the observed relation between news and market activity is not particularly strong and the patterns in news announcements do not explain the day‐of‐the‐week seasonalities in market activity. Our analysis of the Dow Jones database confirms the difficulty of linking volume and volatility to observed measures of information.

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References

1965The Behavior of Stock-Market Prices 1986Stock return variances 1994Market liquidity and volume around earnings announcements 1993Differences of Opinion Make a Horse Race 1988What Moves Stock Prices?1976Capital market seasonality: The case of stock returns 1995Differential Interpretation of Public Signals and Trade in Speculative Markets 1993How Markets Process Information: News Releases and Volatility

Cited by

2020COVID-19: Media coverage and financial markets behavior—A sectoral inquiry 2012Information demand and stock market volatility 2002Pre-announcement effects, news effects, and volatility: Monetary policy and the stock market 1998Investor Reaction to Salient News in Closed‐End Country Funds 1998Macroeconomic news and bond market volatility1We thank Walter Toshi Baily, Bob Korajczyk, Jim Poterba, Mark Watson, seminar participants at the University of Chicago, Columbia University, Cornell University, and the University of Montreal, and especially Ludger Hentschel (the referee) for helpful comments. We also thank Mark Mitchell for supplying data, and Amy C. Ko and Sydney Ludvigson for research assistance. Lamont was supported by the FMC Faculty Research Fund at the Graduate School of Business, University of Chicago. A portion of this research was completed while Lumsdaine was a National Fellow at the Hoover Institution. We also thank the Financial Research Center at Princeton University for support. A previous version of this paper circulated as `Public Information and the Persistence of Bond Market Volatility'.1

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