Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/57713
Authors: 
Hess, Dieter
Niessen, Alexandra
Year of Publication: 
2007
Series/Report no.: 
CFR Working Paper 07-03
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.
Subjects: 
Bayesian Learning
Macroeconomic Announcements
Information Processing
JEL: 
E44
G14
Document Type: 
Working Paper

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