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The Early News Catches the Attention: On the Relative Price Impact of Similar Economic Indicators

38 Pages Posted: 15 Sep 2007 Last revised: 12 Jan 2010

Dieter Hess

University of Cologne - Department of Corporate Finance; University of Cologne - Centre for Financial Research (CFR)

Alexandra Niessen-Ruenzi

University of Mannheim - Department of Finance

Date Written: December 1, 2009

Abstract

This paper investigates why financial markets react to the release of some economic indicators while ignoring others with similar informational content. Based on a Bayesian learning model, we show that the market impact of an economic indicator depends crucially on its early availability. The sequential introduction of the two largest German business surveys provides a natural experiment by which to test the model's implications empirically. We show that even a large and well-established indicator loses market impact if a similar indicator is launched and released earlier.

Keywords: Bayesian Learning, Macroeconomic Announcements, Information Processing

JEL Classification: E44, G14

Suggested Citation

Hess, Dieter and Niessen-Ruenzi, Alexandra, The Early News Catches the Attention: On the Relative Price Impact of Similar Economic Indicators (December 1, 2009). Paris December 2007 Finance International Meeting AFFI-EUROFIDAI Paper. Available at SSRN: https://ssrn.com/abstract=1014634 or http://dx.doi.org/10.2139/ssrn.1014634

Dieter Hess

University of Cologne - Department of Corporate Finance ( email )

Corporate Finance Seminar
Albertus-Magnus-Platz
D-50923 Cologne
Germany
+49 221 470 7876 (Phone)
+49 221 470 7466 (Fax)

HOME PAGE: http://cf.uni-koeln.de/

University of Cologne - Centre for Financial Research (CFR)

Germany

Alexandra Niessen-Ruenzi (Contact Author)

University of Mannheim - Department of Finance ( email )

Mannheim, 68131
Germany

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