38 Pages Posted: 15 Sep 2007 Last revised: 12 Jan 2010
Date Written: December 1, 2009
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, 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