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

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