What Triggers Stock Market Jumps? / Scott R. Baker, Nicholas Bloom, Steven J. Davis, Marco C. Sammon.

Format:

Book

Author/Creator:

Baker, Scott R.

Contributor:

National Bureau of Economic Research.

Bloom, Nicholas.

Davis, Steven J.

Sammon, Marco C.

Series:

Working Paper Series (National Bureau of Economic Research) no. w28687.

NBER working paper series no. w28687

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2021.

Summary:

We examine next-day newspaper accounts of large daily jumps in 16 national stock markets to assess their proximate cause, clarity as to cause, and the geographic source of the market-moving news. Our sample of 6,200 market jumps yields several findings. First, policy news - mainly associated with monetary policy and government spending - triggers a greater share of upward than downward jumps in all countries. Second, the policy share of upward jumps is inversely related to stock market performance in the preceding three months. This pattern strengthens in the postwar period. Third, market volatility is much lower after jumps triggered by monetary policy news than after other jumps, unconditionally and conditional on past volatility and other controls. Fourth, greater clarity as to jump reason also foreshadows lower volatility. Clarity in this sense has trended upwards over the past century. Finally, and excluding U.S. jumps, leading newspapers attribute one-third of jumps in their own national stock markets to developments that originate in or relate to the United States. The U.S. role in this regard dwarfs that of Europe and China.

Notes:

Print version record

April 2021.