What triggers stock market jumps?

Scott Baker, Nicholas Bloom, Steven Davis and Marco C. Sammo

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: 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.

Keywords: stock markets; upward and downward jumps; newspapers; SES 20180940 (search for similar items in EconPapers)
JEL-codes: F3 G3 (search for similar items in EconPapers)
Pages: 78 pages
Date: 2021-08-13
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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http://eprints.lse.ac.uk/113913/ Open access version. (application/pdf)

Related works:
Working Paper: What triggers stock market jumps? (2021)
Working Paper: What triggers stock market jumps? (2021)
Working Paper: What Triggers Stock Market Jumps? (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:113913

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