What moves stock prices?

By David M. Cutler, J. Poterba, Lawrence H. Summers. 1989

This paper estimates the fraction of the variance in aggregate stock returns that can be attributed to various kinds of news. First, we consider macroeconomic news and show that it is difficult to explain more than one third of the return variance from this source. Second, to explore the possibility that the stock market responds to information that is omitted from our specifications, we also examine market moves coincident with major political and world events. The relatively small market responses to such news, along with evidence that large market moves often occur on days without any identifiable major news releases, casts doubt on the view that stock price movements are fully explicable by news about future cash flows and discount rates.

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Citations in the corpus

Improving stock market prediction via heterogeneous information fusion (2017, background): “Various studies have found that ﬁnancial news can dramatically aﬀect the stock price [14, 15, 16, 17, 18, 19].”
Political News and Stock Prices: The Case of Saddam Hussein Contracts (2004, background): “The very weak explanatory value of news about Saddam’s fall before the war also suggests that moves in stock prices reflect something other than fundamental values, as suggested by Cutler et al. (1989).”
Carry Trades and Currency Crashes (2008, background): “phenomenon that many abrupt asset price movements cannot be attributed to a fundamental news events, as documented by Cutler, Poterba, and Summers (1989) and Fair (2002).”
Algorithmic Complexity of Financial Motions (2014, unknown): “Some researchers claim that the EMH over-naturalizes a mere social construction, some that evidence shows that prices evolve significantly even when no major information is released to the market – Cutler et al. (1989).”
Intraday and interday volatility in the Japanese stock market (2000, background): “In contrast, Cutler et al. (1989) find little association between the largest daily”
Sentiment Polarity Identification in Financial News: A Cohesion-based Approach (2007, background): “Indeed, much early work used such market variables or readily quantiﬁable aspects of news as a proxy for the news itself: e.g. news arrival, type, provenance and volumes (Cutler et al., 1989; Mitchell and Mul-herin, 1994).”
News-based trading strategies (2016, background): “In the same context, several publications (e. g. [2, 3, 4]) study the market reception of news announcements, ﬁnding a causal and clearly measurable relationship between ﬁnancial disclosures and stock market reaction.”
Correlated Trading and Returns (2008, background): “For instance, Cutler, Poterba, and Summers (1989) note that many big moves of the US stock markets were not accompanied by major news, and on many days on which major news appeared, the stock market’s move was not exceptionally big; Mitchell and Mulherin (1994) report that variation in news…”
Media-aware quantitative trading based on public Web information (2014, background): “The research can be traced back to thework of Cutler, Poterba, and Summers in 1989 [9], which on one hand showed that there was no direct link between news and stock returns at that time.”
Shocks, Crashes and Bubbles in Financial Markets (2010, background): “According to standard economic theory, the complex trajectory of stock market prices is the faithful reflection of the continuous flow of news that are interpreted and digested by an army of analysts and traders (Cutler et al., 1989).”
Using Markets to Inform Policy: The Case of the Iraq War (2009, unknown): “The wisdom is based in part on studies like Cutler et al.'s (1989), which find that first-order news events (including”