Research / White PaperMay 24, 2021

The Distinctive Character of Policy-Driven Stock Market Jumps

Scott R. Baker, Nicholas Bloom, Steven J. Davis, Marco Sammon

When the stock market moves in a big way, journalists try to explain why. This column uses next-day newspaper accounts to characterize the drivers of more than 6,000 big daily moves (“jumps”) across 16 national stock markets. Policy-driven jumps account for a greater share of upward than downward jumps in all countries. Jumps attributed to monetary policy foreshadow much lower levels of future stock market volatility than other jumps. In another striking pattern, U.S.-related news drives one-third of national stock market jumps in other countries.

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