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

Hess, Dieter; Niessen-Ruenzi, Alexandra

doi:10.2139/ssrn.1014634

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

Paris December 2007 Finance International Meeting AFFI-EUROFIDAI Paper

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

See all articles by Dieter Hess

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; 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: Suggested Citation

Hess, Dieter and Niessen-Ruenzi, Alexandra 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