The Empirical Information Sensitivity of Treasury Bonds and Stocks

Abstract

In this paper we propose an empirical measure of information sensitivity based on historical prices. If long term Treasury bonds with riskless payments are not held to maturity its information sensitivity is 0.4% higher than the S&P500 index in the period 2010 to 2020. We derive an information sensitivity channel of government asset purchases and show that large scale stock purchases by the Chinese National Team during the stock market crash in June 2015 reduce the information sensitivity of intervened stocks by 16% compared to other stocks. When stocks become less information sensitive, there is less issuance of equity reports.