Remarks by a reader show its rewarding to evaluate this topic. Think about:
If markets are informationally efficient, corporate news events such as incomes announcements ought to be immediately reflected in stock prices. Now, really examining stock-price responses to business events is also not as straightforward as it sounds. However Gene and his coauthors offered the standard option to all of the empirical problems that survive to this day. The tremendous event-study literature followed, permitting academic accounting to determine the impact of business occasions by the associated stock price motions.
If markets are informationally effective, corporate news occasions such as incomes announcements must be immediately shown in stock costs. The tremendous event-study literature followed, permitting scholastic accounting to measure the result of corporate events by the associated stock price motions.
This is from a conversation of Famas contributions. And what is an occasion research study? From Investopedia:
An event research study is an empirical analysis that analyzes the effect of a considerable driver incident or contingent occasion on the worth of a security, such as company stock.
Now think about these comments in reaction to this post:
No upgrade? The Shanghai Composite, USD: Yuan, and Hong Kong Index each recouped these reasonably modest (e.g. Shanghai was just ~ -2% and HK ~ -3.8%) Nov 27 losses.
Its likewise important to keep in mind that Menzies cherry-picked data sample amplifies the shock-value of current (transitory) losses. The same datasets viewed from simply a month back wouldve revealed this weeks declines as nothing much more than go back to current levels.
Constantly beware economic experts sounding alarms.
Here is the upgraded graph for the Shanghai composite:
Figure 1: Shanghai 30 index.
The occasion I focused in on my 27 November post on is shown in the red circle is what I focused in. The point was the break out of prevalent demonstrations, as “news”, as displayed in one-week-detail listed below:
Figure 2: Red circle represents action to protests.
For an example of the application of the principle of “news” in efficient markets, see this post.
The reader brings out attention to the recouping of losses on Tuesday (local time). However, its not as if nothing occurred on Tuesday. Rather, as suggested in the WSJ:
Hong Kongs benchmark Hang Seng Index jumped 5.2% on Tuesday, ending on a high after Chinas national health authority talked down the dangers of the Omicron variant of the coronavirus and stated it would increase vaccinations for the elderly.
The move reveals the government is still refining its approach to Covid-19, one of the most significant issues of global investors. Chinas strict Covid-19 policies recently sustained protests across the nation, something that was partially to blame for falling markets in both Hong Kong and the U.S. on Monday.
Tuesdays rally was also helped by a move by Chinas securities regulator to loosen limitations on home business raising equity financing in its domestic market, a source of capital they havent had access to for many years, said strategists. Chinese designer Longfor was among the very best performers, increasing more than 11% in Hong Kong.
…
Chinas CSI 300 index increased 3.1% Tuesday, while the Shanghai Composite increased 2.3%.
This is displayed in the green rectangular shape in the figure below:
If markets are informationally effective, corporate news occasions such as incomes announcements need to be instantly reflected in stock costs. Now, really inspecting stock-price reactions to corporate events is also not as simple as it sounds. The immense event-study literature followed, permitting scholastic accounting to determine the result of business occasions by the associated stock price motions.
If markets are informationally effective, corporate news events such as earnings announcements ought to be instantly reflected in stock prices. The enormous event-study literature followed, allowing academic accounting to determine the impact of corporate events by the associated stock cost motions.
Figure 3: Green rectangular shape signifies government policy measures to support property sector, increased vaccination for elderly.
Simply put, not all else was held continuous on Tuesday.
I didnt think I d require to discuss this principle, however apparently I do. Here is an earlier application of the “news” idea (again China-related, but this time hogs)
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