Stock Prices, News, and Business Conditions

45 Pages Posted: 13 Nov 2007 Last revised: 16 Aug 2010

See all articles by Grant Richard McQueen

Grant Richard McQueen

Brigham Young University - Department of Business Management

V. Vance Roley

University of Hawaii at Manoa - Shidler College of Business; National Bureau of Economic Research (NBER)

Date Written: November 1990

Abstract

Previous research finds that fundamental macroeconomic news has little effect on stock prices. This study shows that after allowing for different stages of the business cycle, a stronger relationship between stock prices and news is evident. In particular, the empirical results suggest that the effect of news about real economic activity depends on the varying responses of expected cash flows relative to equity discount rates. When the economy is strong, for example, the stock market responds negatively to good news about real economic activity, reflecting the larger effect on discount rates relative to expected cash flows.

Suggested Citation

McQueen, Grant R. and Roley, V. Vance, Stock Prices, News, and Business Conditions (November 1990). NBER Working Paper No. w3520, Available at SSRN: https://ssrn.com/abstract=471517

Grant R. McQueen (Contact Author)

Brigham Young University - Department of Business Management ( email )

TNRB 636
Provo, UT 84602
United States
801-422-3017 (Phone)

V. Vance Roley

University of Hawaii at Manoa - Shidler College of Business ( email )

2404 Maile Way
Honolulu, HI 96822
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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