News and Sectoral Comovement

KOF Working Paper No. 183

32 Pages Posted: 10 Dec 2007

See all articles by Michael J. Lamla

Michael J. Lamla

ETH Zurich - KOF Swiss Economic Institute; University of Essex

Sarah M. Lein

University of Basel; Swiss National Bank; ETH Zurich - KOF Swiss Economic Institute

Jan-Egbert Sturm

KOF Swiss Economic Institute, ETH Zurich; CESifo (Center for Economic Studies and Ifo Institute)

Date Written: December 2007

Abstract

This paper tests the existence of strategic information complementarities as a source of sectoral comovement. A theoretical model derived in Veldkamp and Wolfers (2007) explains sectoral comovement by the assumption that firms rely too much on aggregate information to make output decisions. We find empirical support for this hypothesis: news on aggregate developments, on average, affect firms production plans significantly more than news on sector-specific developments. This result is based on a rich dataset on firm survey and media releases for Germany comprising 01/1999-07/2006.

Keywords: Media reporting, news, expectation driven business cycles, information complementarities, sectoral comovement

JEL Classification: E32, D82

Suggested Citation

Lamla, Michael J. and Lein, Sarah M. and Sturm, Jan-Egbert, News and Sectoral Comovement (December 2007). KOF Working Paper No. 183. Available at SSRN: https://ssrn.com/abstract=1068636 or http://dx.doi.org/10.2139/ssrn.1068636

Michael J. Lamla (Contact Author)

ETH Zurich - KOF Swiss Economic Institute ( email )

Zurich
Switzerland

University of Essex ( email )

Wivenhoe Park
Colchester, CO4 3SQ
United Kingdom

Sarah M. Lein

University of Basel ( email )

Petersplatz 1
Basel, CH-4003
Switzerland

Swiss National Bank ( email )

Research
Fraumuensterstr. 8
Zuerich, 8022
Switzerland

ETH Zurich - KOF Swiss Economic Institute ( email )

Zurich
Switzerland

Jan-Egbert Sturm

KOF Swiss Economic Institute, ETH Zurich ( email )

Zurich
Switzerland

HOME PAGE: http://www.kof.ethz.ch

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, 81679
Germany

HOME PAGE: http://www.cesifo.de

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