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Cited by 794Financial Markets and Investment StrategiesMarket Dynamics and VolatilityFinancial Analysis and Corporate Governance

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The Stock Market's Reaction to Unemployment News: Why Bad News Is Usually Good for Stocks

BOYD, JOHN H., HU, JIAN, JAGANNATHAN, RAVI·2005·The Journal of Finance
DOI 10.1111/j.1540-6261.2005.00742.x
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Abstract

We find that on average, an announcement of rising unemployment is good news for stocks during economic expansions and bad news during economic contractions. Unemployment news bundles three types of primitive information relevant for valuing stocks: information about future interest rates, the equity risk premium, and corporate earnings and dividends. The nature of the information bundle, and hence the relative importance of the three effects, changes over time depending on the state of the economy. For stocks as a group, information about interest rates dominates during expansions and information about future corporate dividends dominates during contractions.

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Research works printed but not linked: 19

  1. Blanchard Olivier J., 1981, Output, the stock market, and interest rates, American Economic Review, 71, 132
  2. 10.1086/261527 · DOI
  3. Campbell John Y., 1993, Where do betas come from? Asset price dynamics and the sources of systematic risk, Review of Financial Studies, 6, 567, 10.1093/rfs/5.3.567 · DOI
  4. Chen Nai‐fu, 1986, Economic forces and the stock market, Journal of Business, 46, 529
  5. 10.1093/rfs/6.3.527 · DOI
  6. 10.1111/0022-1082.00148 · DOI · Paper page
  7. Fleming Michael J. andEli M.Remolona 1998 The term structure of announcement effects Working paper Federal Reserve Bank of New York. · DOI
  8. 10.2307/1912559 · DOI
  9. 10.1016/0304-405X(89)90049-4 · DOI
  10. 10.1086/209747 · DOI
  11. Jagannathan Ravi, 2000, The declining U.S. equity premium, Quarterly Review, 24, 3
  12. Jagannathan Ravi andZhenyuWang 1993 The CAPM is alive and well Staff Report #165 Federal Reserve Bank of Minneapolis. · DOI
  13. Krueger Anne B. 1996 Do markets respond more to more reliable labor market data? A test of market rationality NBER Working paper 5769. · DOI
  14. 10.1111/0022-1082.00164 · DOI
  15. 10.2469/faj.v55.n5.2295 · DOI
  16. 10.1093/rfs/5.3.683 · DOI
  17. 10.1086/261226 · DOI
  18. 10.1086/654119 · DOI
  19. 10.1093/rfs/12.5.975 · DOI · Paper page

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Metadata

Authors
BOYD, J. H., HU, J., & JAGANNATHAN, R.
Affiliations
  • University of Minnesota (US)
  • Northwestern University (US)
ORCID
JAGANNATHAN, RAVI
Venue
The Journal of Finance
Publisher
Wiley
Published
2005-03-02
Volume
60
Issue
2
Pages
649-672
ISSN
  • 0022-1082 (ISSN-L)
  • 1540-6261
DOI
10.1111/j.1540-6261.2005.00742.x
OpenAlex
W3125404604
Cited by
794
References
0
Citations by year
2026: 28 · 2025: 28 · 2024: 29 · 2023: 37 · 2022: 36 · 2021: 70 · 2020: 39 · 2019: 48 · 2018: 36 · 2017: 40 · 2016: 32 · 2015: 34 · 2014: 40 · 2013: 40 · 2012: 48
FWCI
51.84
Type
journal article
Language
en
Open access
closed
Licence
onlinelibrary.wiley.com/termsAndConditions#vor (vor)
Locations
The Journal of Finance (publishedVersion)
Topics
  • Social Sciences › Economics, Econometrics and Finance › Finance › Financial Markets and Investment Strategies
  • Social Sciences › Economics, Econometrics and Finance › Economics and Econometrics › Market Dynamics and Volatility
  • Social Sciences › Business, Management and Accounting › Accounting › Financial Analysis and Corporate Governance
Keywords
stock market reaction, interest rates, equity premium, corporate profits, dividends, macroeconomic news

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CoChat. (2026). Citation check: The Stock Market's Reaction to Unemployment News: Why Bad News Is Usually Good for Stocks. https://app.cochat.ai/papers/10.1111/j.1540-6261.2005.00742.x
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BOYD, J. H., HU, J., & JAGANNATHAN, R. (2005). The Stock Market's Reaction to Unemployment News: Why Bad News Is Usually Good for Stocks. The Journal of Finance. https://doi.org/10.1111/j.1540-6261.2005.00742.x