A Test of the News Model of Stock Price Determination in an Emerging Market: The Case of Kuwait

Sulaiman Al-Abduljader and Imad Moosa ()
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Imad Moosa: Monash University

No 710, Working Papers from Economic Research Forum

Abstract: In this paper a news model of stock price determination is specified and estimated using the KSE index as the price variable over the period January 1996-December 2004. Of the five explanatory news variables, only the news terms of the money supply and government revenue turned out to be significant and correctly signed. Some weaker evidence is also found for the effect of the interest rate news term. The news model shows little dynamics, implying that news is reflected rather quickly on stock prices. It is also demonstrated that stock prices react to the media news and announcements, but it is not possible to measure the unanticipated components of the announcements in the absence of a proper survey of opinions.

Pages: 20
Date: 2007-01-01, Revised 2007-01-01
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