The early news catches the attention: On the relative price impact of similar economic indicators

Dieter Hess and Alexandra Niessen

No 07-03, CFR Working Papers from University of Cologne, Centre for Financial Research (CFR)

Abstract: There is strong evidence that macroeconomic releases influence prices in financial markets. However, why do markets react to some announcements while they ignore others with a similar content? Based on a Bayesian learning model, we show that market impact is mainly determined by information quality and timeliness of a release. To test the model's implications, we analyze the successive introduction of the two largest German business surveys: the well-known IFO index and the recently introduced ZEW economic indicator. In line with the model's prediction, we find a diminishing market impact of the IFO index after the ZEW indicator was introduced.

Keywords: Bayesian Learning; Macroeconomic Announcements; Information Processing (search for similar items in EconPapers)
JEL-codes: E44 G14 (search for similar items in EconPapers)
Date: 2007
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:cfrwps:0703

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