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The Stock Market's Reaction to Unemployment News: Why Bad News Is Usually Good for Stocks
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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“They found that in expansionary periods, stocks typically rise on bad unemployment news, while the opposite relationship holds for contraction periods.”
From Methods and Analysis of Collar Strategies (2021) · cites this paper as Boyd et al. (2005)
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Research works printed but not linked: 19
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Methods and Analysis of Collar Strategies
El-Hassan, N., Hall, A., & Tulunay, I. (2021) · Journal of Applied Business and Economics · doi:10.33423/jabe.v23i8.4882
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
- 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
- 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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