Stock Market News and Economic Fluctuations

55 Pages Posted: 21 Jun 2022 Last revised: 1 Nov 2023

See all articles by Stig Vinther Møller

Stig Vinther Møller

Aarhus University - CREATES

Richard Priestley

Norwegian Business School

Date Written: October 15, 2023


We decompose stock market returns into cash flow news and discount rate news and show that an increase in discount rate news, which reflects an increase in the quantity of risk or level of risk aversion in the economy, predicts a decrease in future aggregate output. Discount rate news dominates cash flow news and holds incremental predictive power relative to well-established predictors of output. The predictive power is especially strong in the lower tail of output fluctuations. International evidence confirms U.S. results and also shows that global discount rate news predicts cross-country output stronger than country-specific discount rate news.

Keywords: discount rate news, cash flow news, macroeconomic fluctuations

JEL Classification: g12

Suggested Citation

Møller, Stig Vinther and Priestley, Richard, Stock Market News and Economic Fluctuations (October 15, 2023). Available at SSRN: or

Stig Vinther Møller (Contact Author)

Aarhus University - CREATES ( email )

Nordre Ringgade 1
Aarhus, DK-8000

Richard Priestley

Norwegian Business School ( email )

N-0442 Oslo, 0283
47 46410515 (Phone)

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