òòò½Íø Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
Stock Prices, News, and Economic Fluctuations
òòò½Íø Review
(pp. 1293–1307)
(Complimentary)
Abstract
We show that the joint behavior of stock prices and TFP favors a view of business cycles driven largely by a shock that does not affect productivity in the short run – and therefore does not look like a standard technology shock – but affects productivity with substantial delay – and therefore does not look like a monetary shock. One structural interpretation for this shock is that it represents news about future technological opportunities which is first captured in stock prices. This shock causes a boom in consumption, investment, and hours worked that precedes productivity growth by a few years, and explains about 50 percent of business cycle fluctuations. (JEL G12, E32, E44)Citation
Beaudry, Paul, and Franck Portier. 2006. "Stock Prices, News, and Economic Fluctuations." òòò½Íø Review 96 (4): 1293–1307. DOI: 10.1257/aer.96.4.1293Additional Materials
JEL Classification
- E32 Business Fluctuations; Cycles
- E44 Financial Markets and the Macroeconomy
- G14 Information and Market Efficiency; Event Studies; Insider Trading