Expectation dispersion, uncertainty, and the reaction to news
Key macroeconomic indicator releases are closely monitored by financial markets. We examine the impact of expectation dispersion and economic uncertainty on the stock market’s reaction to these indicators. We find that the strength of the financial market response to news decreases with the precedin...
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| Main Authors: | , , |
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| Format: | Article (Journal) |
| Language: | English |
| Published: |
3 April 2023
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| In: |
European economic review
Year: 2023, Volume: 154, Pages: 1-13 |
| ISSN: | 1873-572X |
| DOI: | 10.1016/j.euroecorev.2023.104440 |
| Online Access: | lizenzpflichtig lizenzpflichtig 
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| Author Notes: | Benjamin Born, Jonas Dovern, Zeno Enders |
| Summary: | Key macroeconomic indicator releases are closely monitored by financial markets. We examine the impact of expectation dispersion and economic uncertainty on the stock market’s reaction to these indicators. We find that the strength of the financial market response to news decreases with the preceding dispersion in expectations about the indicator value. Higher uncertainty, in contrast, increases the response. We rationalize our findings in a model of imperfect information. In the model, dispersion results from a perceived weak link between macroeconomic indicators and fundamentals that reduces the informational content of indicators, while fundamental uncertainty makes their informational content more valuable. |
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| Item Description: | Online verfügbar 30. März 2023, Artikelversion 3. April 2023 Gesehen am 19.05.2023 |
| Physical Description: | Online Resource |
| ISSN: | 1873-572X |
| DOI: | 10.1016/j.euroecorev.2023.104440 |