Government spending news and stock price index

Boniface Yemba (), Yi Duan () and Nabaneeta Biswas
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Boniface Yemba: Marshall Univerisity
Yi Duan: Marshall University

Economics Bulletin, 2023, vol. 43, issue 4, 1816 - 1841

Abstract: In this paper, we investigate the effects of US federal spending news on the S&P 500 stock price index. Unlike previous studies, we model news based on actual spending bills signed by the US President and focus on a period of important spending changes in US history (January 2000 - December 2022). Using a Mixed Frequency Time-Varying Parameters Factor Augmented Vector Autoregressive (MF-TVP-FAVAR) model, we find a negative impact of spending news shock on the S&P 500 index. We ascertain the robustness of our result using the Nasdaq and Dow Jones stock price indices as well as estimates from a Bayesian VAR model.

Keywords: Spending News; Stock Price Index; FAVAR; Mixed frequencies (search for similar items in EconPapers)
JEL-codes: C2 E5 (search for similar items in EconPapers)
Date: 2023-12-30
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