News events and Price movements 3. News Effects: Rapid return reactions Piles of studies of empirical financial market research make it evident: De- layed effects of news do not represent the norm. even on days when"bi events dominate headlines in the media, according to Cutler, Poterba and Summers(1989), the price movements that occur are rather small most of the time. On the other hand, many of the largest market movements take place on days without significant events in the news. Generally speaking, it seems to be true that no systematic relationship can be established between the publication of business and other news in the media and consequent substantial stock price changes in the financial markets. Market prices fluctuate, but often the news are not very important And vice versa This result has been and is still underpinned by exponents of the theory of efficient markets in a large number of event studies: Stock prices react quickly to new information, even before it is published by the news media. Effects of new information on stock prices in the form of systematic and delayed price reactions do not represent the rule. On the contrary: Fama, Fisher, Jensen and Roll(1969)already point out in their study on market reactions to stocks splits that stock prices adjust very rapidly to new information. Shortly after the announcement of splits, the authors state, mostly within one day only, the relevant price adjustments have been carried out. Therefore, it is usually im- ossible to achieve an abnormal gain by reacting to such data Ball and Brown(1968) look at market reactions to the publication of ac- counting income numbers in the Wall Street Journal. Their result: The major part of new information is anticipated in stock prices in the preceding months The actual publication in the newspaper hardly has got any measurable ef- fect.26"The market", according to Dimson and Mussavian(2000), "appears to anticipate the information, and most of the price adjustment is complete be- fore the event is revealed to the market. When news is released, the remaining price adjustment takes place rapidly and accurately. The conclusion from this is the following: That published information does not permit forecasts of stock price changesNews Events and Price Movements 3. News Effects: Rapid Return Reactions Piles of studies of empirical financial market research make it evident: De￾layed effects of news do not represent the norm. Even on days when “big events” dominate headlines in the media, according to Cutler, Poterba and Summers (1989), the price movements that occur are rather small most of the time. On the other hand, many of the largest market movements take place on days without significant events in the news. Generally speaking, it seems to be true that no systematic relationship can be established between the publication of business and other news in the media and consequent substantial stock price changes in the financial markets. Market prices fluctuate, but often the news are not very important. And vice versa. This result has been and is still underpinned by exponents of the theory of efficient markets in a large number of event studies: Stock prices react quickly to new information, even before it is published by the news media. Effects of new information on stock prices in the form of systematic and delayed price reactions do not represent the rule. On the contrary: Fama, Fisher, Jensen and Roll (1969) already point out in their study on market reactions to stocks splits “that stock prices adjust very rapidly to new information.”24 Shortly after the announcement of splits, the authors state, mostly within one day only, the relevant price adjustments have been carried out.25 Therefore, it is usually im￾possible to achieve an abnormal gain by reacting to such data. Ball and Brown (1968) look at market reactions to the publication of ac￾counting income numbers in the Wall Street Journal. Their result: The major part of new information is anticipated in stock prices in the preceding months. The actual publication in the newspaper hardly has got any measurable ef￾fect.26 “The market”, according to Dimson and Mussavian (2000), “appears to anticipate the information, and most of the price adjustment is complete be￾fore the event is revealed to the market. When news is released, the remaining price adjustment takes place rapidly and accurately.“27 The conclusion from this is the following: That published information does not permit forecasts of stock price changes. 9