Forum for Science, Industry and Business

Sponsored by:     3M 
Search our Site:

 

On the stock exchange, every minute counts

15.11.2007
When the US Federal Reserve cut interest rates by 0.5% on 18 September, share prices rose 1.5% on the New York stock exchange within five minutes.

According to Financial Econometrics Professor Dick van Dijk, recently developed econometric techniques making it possible to measure the impact of an interest rate adjustment on share prices more precisely. He discovered that there are sharp differences between the effects of good news and of bad news. On Thursday, 15 November 2007, Prof. van Dijk will deliver his inaugural lecture entitled Good news is no news at the Erasmus University Rotterdam.

News plays a crucial role in pricing on financial markets. In an efficient market, current prices reflect all the information available at that moment, so that only genuinely new information will lead to a price adjustment. The smallest unexpected adjustment in interest rates has an immediate impact on all share prices, while a large interest rate adjustment that investors already expected will not generate a response on the stock markets.

Van Dijk shows that it is possible to measure the effects of an adjustment in US interest rates precisely if you track share prices on the New York stock exchange up to the minute. An unexpected interest rate adjustment of 0.25% leads to a return of more than 1% within five minutes of the news being announced.

The effects of positive and negative news on share prices also differ considerably. Only if there is good news does the stock market response depend on the amount of the unexpected cut in interest rates. If there is bad news, prices respond only to the fact that the interest rate increase was unexpected.

Dick van Dijk (1971) is a Professor of Financial Econometrics at the Econometric Institute of the Economic Sciences Faculty. He received his PhD (cum laude) in 1999 from the Erasmus University Rotterdam. His research focused on econometric models to describe and predict financial variables such as share risks and returns. He has published in the Journal of Applied Econometrics, the Journal of Business and Economic Statistics, the Journal of Econometrics, the Journal of Empirical Finance and the Review of Economics and Statistics, and co-authored Nonlinear Time Series Models in Empirical Finance (with Philip Hans Franses, Cambridge University Press, 2000).

Yvette Nelen | alfa
Further information:
http://www.eur.nl/english

More articles from Business and Finance:

nachricht Microtechnology industry is hiring – positive developments of past years continue
09.04.2018 | IVAM Fachverband für Mikrotechnik

nachricht RWI/ISL-Container Throughput Index with minor decline on a high overall level
20.03.2018 | RWI – Leibniz-Institut für Wirtschaftsforschung

All articles from Business and Finance >>>

The most recent press releases about innovation >>>

Die letzten 5 Focus-News des innovations-reports im Überblick:

Im Focus: Powerful IT security for the car of the future – research alliance develops new approaches

The more electronics steer, accelerate and brake cars, the more important it is to protect them against cyber-attacks. That is why 15 partners from industry and academia will work together over the next three years on new approaches to IT security in self-driving cars. The joint project goes by the name Security For Connected, Autonomous Cars (SecForCARs) and has funding of €7.2 million from the German Federal Ministry of Education and Research. Infineon is leading the project.

Vehicles already offer diverse communication interfaces and more and more automated functions, such as distance and lane-keeping assist systems. At the same...

Im Focus: Molecular switch will facilitate the development of pioneering electro-optical devices

A research team led by physicists at the Technical University of Munich (TUM) has developed molecular nanoswitches that can be toggled between two structurally different states using an applied voltage. They can serve as the basis for a pioneering class of devices that could replace silicon-based components with organic molecules.

The development of new electronic technologies drives the incessant reduction of functional component sizes. In the context of an international collaborative...

Im Focus: LZH showcases laser material processing of tomorrow at the LASYS 2018

At the LASYS 2018, from June 5th to 7th, the Laser Zentrum Hannover e.V. (LZH) will be showcasing processes for the laser material processing of tomorrow in hall 4 at stand 4E75. With blown bomb shells the LZH will present first results of a research project on civil security.

At this year's LASYS, the LZH will exhibit light-based processes such as cutting, welding, ablation and structuring as well as additive manufacturing for...

Im Focus: Self-illuminating pixels for a new display generation

There are videos on the internet that can make one marvel at technology. For example, a smartphone is casually bent around the arm or a thin-film display is rolled in all directions and with almost every diameter. From the user's point of view, this looks fantastic. From a professional point of view, however, the question arises: Is that already possible?

At Display Week 2018, scientists from the Fraunhofer Institute for Applied Polymer Research IAP will be demonstrating today’s technological possibilities and...

Im Focus: Explanation for puzzling quantum oscillations has been found

So-called quantum many-body scars allow quantum systems to stay out of equilibrium much longer, explaining experiment | Study published in Nature Physics

Recently, researchers from Harvard and MIT succeeded in trapping a record 53 atoms and individually controlling their quantum state, realizing what is called a...

All Focus news of the innovation-report >>>

Anzeige

Anzeige

VideoLinks
Industry & Economy
Event News

In focus: Climate adapted plants

25.05.2018 | Event News

Save the date: Forum European Neuroscience – 07-11 July 2018 in Berlin, Germany

02.05.2018 | Event News

Invitation to the upcoming "Current Topics in Bioinformatics: Big Data in Genomics and Medicine"

13.04.2018 | Event News

 
Latest News

In focus: Climate adapted plants

25.05.2018 | Event News

Flow probes from the 3D printer

25.05.2018 | Machine Engineering

Less is more? Gene switch for healthy aging found

25.05.2018 | Life Sciences

VideoLinks
Science & Research
Overview of more VideoLinks >>>