How Economic News Moves Markets

1. Define the following terms used in the reading:

   a. high-frequency data
   b. basis point

2. What impact do the authors predict news of unexpected economic strength or unexpected inflationary pressure to have on interest rates?

   a. Why do they predict this effect?
   b. Explain their account of the effects of unexpected economic strength or inflationary pressure in terms of supply and demand in the market for bonds. Illustrate your explanation with bond demand and supply diagrams.
   c. Are the authors as certain of the effects unexpected economic strength or inflationary pressure will have on asset prices in foreign exchange and stock markets as they are for bond markets? Why?
   

3. What research methodology do the authors use to test the impact of unexpected news on asset prices?

   a. How do they define “news”?
   b. What economic news releases do they use as independent variables?
   c. What specific asset prices do they use as dependent variables?
   d. Why do they utilize two different time periods for measuring their dependent variables?
   e. What problems in their research methodology do the authors discuss?
   

4. What are the author’s major findings? How well do these findings accord with their predictions?

Source: “How Economic Leonardo Bartolini, Linda Goldberg, and Adam Sacarny, Current Issues in Economics and Finance 14(6), Federal Reserve Bank of New York, August 2008. News Moves Markets.”