Macroeconomic news and price synchronicity

Arbab K. Cheema, Arman Eshraghi, Qingwei Wang

Research output: Contribution to journalArticlepeer-review

3 Citations (Scopus)

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.
Original languageEnglish
Pages (from-to)390-412
JournalJournal of Empirical Finance
Volume73
Early online date30 Aug 2023
DOIs
Publication statusPublished - Sept 2023
Externally publishedYes

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