When does the stock market listen to economic news? New evidence from copulas and news wires

By Ivan Medovikov. 2014

50 citations recorded by the source corpus.

We study association between macroeconomic news and stock market returns using the statistical theory of copulas, and a new comprehensive measure of news based on textual review and classification of news wires. We find the impact of economic news on equity returns to be nonlinear and asymmetric. In particular, controlling for economic conditions and surprises associated with releases of economic data, we find that the market reacts strongly and negatively to the most unfavourable macroeconomic news, but appears to largely discount the good news. Further, the most-unfavorable news creates price drift, and we document that selling stocks short in the wake of unusually-bad news yields annual abnormal gross returns greater than four percent.

Subfields: Accounting, Finance, Sociology and Political Science

Citations in the corpus

• Deep Learning Approach for Short-Term Stock Trends Prediction Based on Two-Stream Gated Recurrent Unit Network (2018, neutral): “…has finally won $120 million from samsung patent battle’’, if the system only analyzes individual terms ‘‘Samsung’’, ‘‘won’’, ‘‘Apple’’, it cannot differentiate between the winner and the loser thus it is unable to anticipate that the stock price of apple will probably go up in the near future [22].”
• The impact of macroeconomic news on Bitcoin returns (2020, unknown): “The correct interpretation of such news announcements becomes critical if the issues of asymmetry and non-linearity of the impact of economic news on financial assets are taken into consideration (Medovikov [2016]).”