Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/232398 
Year of Publication: 
2020
Series/Report no.: 
CESifo Working Paper No. 8801
Publisher: 
Center for Economic Studies and Ifo Institute (CESifo), Munich
Abstract: 
Releases of key macroeconomic indicators are closely watched by financial markets. We investigate the role of expectation dispersion and economic uncertainty for the stock-market reaction to indicator releases. We find that the strength of the financial market response to news decreases with the preceding dispersion in expectations about the indicator value. Uncertainty, in contrast, increases the response. We rationalize our findings in a model of imperfect information. In the model, dispersion results from a perceived weak link between macroeconomic indicators and fundamentals that reduces the informational content of indicators, while higher fundamental uncertainty makes this informational content more valuable.
Subjects: 
expectation dispersion
uncertainty
macroeconomic news
stock market
event study
forecaster disagreement
JEL: 
E44
G12
G14
Document Type: 
Working Paper
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