Macroeconomic news and price synchronicity

Cheema, Arbab K., Eshraghi, Arman ORCID: https://orcid.org/0000-0002-7406-1725 and Wang, Qingwei ORCID: https://orcid.org/0000-0002-3695-7846 2023. Macroeconomic news and price synchronicity. Journal of Empirical Finance 73 , pp. 390-412. 10.1016/j.jempfin.2023.08.002 Item availability restricted.

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Abstract

Stock price synchronicity is a critical consideration for asset allocation, risk assessment, and hedging decision. We present novel evidence that individual stock returns comove more persistently on certain days of the week. Specifically, we show that release of macroeconomic news on Mondays, which typically see fewer announcements, leads to such stronger comovement, and that this is distinct from the Monday effect typically discussed in the literature. This synchronicity is more pronounced among large, old and low volatility firms, in both up- and down-market conditions. We argue this effect is partly due to ‘simultaneous contrast’, i.e., perception of stimulus depending on its surrounding environment. Monday announcements have a larger impact just as thunder in a quiet night sounds louder. Our findings are robust after controlling for day-of-the-week effects, economic uncertainty, risk aversion, investor sentiment, short-selling constraints and proxies for attention to news.

Item Type:	Article
Date Type:	Publication
Status:	Published
Schools:	Business (Including Economics)
Publisher:	Elsevier
ISSN:	0927-5398
Date of First Compliant Deposit:	4 August 2023
Date of Acceptance:	7 August 2023
Last Modified:	18 Nov 2023 17:36
URI:	https://orca.cardiff.ac.uk/id/eprint/161440

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