What Moves Markets?

Abstract

What share of asset price movements is driven by news? We attempt to answer this question by building a large, time-stamped event database covering scheduled macroeconomic data releases, central bank announcements, bond auctions, as well as unscheduled news such as election results, sovereign rating downgrades, and natural catastrophes. We combine this news database with high-frequency stock price and bond yield changes, both for the United States and the euro area, going back to 2002. We find that news events account for about 50% of all market movements, suggesting that a much larger amount of return variation than previously thought can be traced back to observable news. Finally, we use our news database to quantify the share of asset price variation due to different types of news, to study the predictability of monetary policy surprises, and to dissect changes in the stock-bond correlation.