New Publication in the European Economic Review

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The European Economic Review published a study by Prof. Dr. Jonas Dovern (joint work with Benjamin Born and Zeno Enders). Using survey data and financial markets data, the study examines the impact of expectation dispersion and economic uncertainty on the stock market’s reaction to these indicators. It shows that the strength of the financial market response to news decreases with the preceding dispersion in expectations about the indicator value. Higher uncertainty, in contrast, increases the response. The results can be explained by a model in which dispersion results from a perceived weak link between macroeconomic indicators
and fundamentals that reduces the informational content of indicators, while fundamental uncertainty makes their informational content more valuable.