Adam Smith Business School

Professor Nicholas Bloom, Stanford University

'What Triggers Stock Market Jumps?' (co-authored by S. R. Baker, S. J. Davis & M. C. Sammon)
Thursday 20 January, 4pm - 5.30pm
Zoom online seminar

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Abstract

We examine next-day newspaper accounts of large daily jumps in 16 national stock markets to assess their proximate cause, clarity as to cause, and the geographic source of the market-moving news. Our sample of 6,200 market jumps yields several findings. First, policy news – mainly associated with monetary policy and government spending – triggers a greater share of upward than downward jumps in all countries. Second, the policy share of upward jumps is inversely related to stock market performance in the preceding three months. This pattern strengthens in the postwar period. Third, market volatility is much lower after jumps triggered by monetary policy news than after other jumps, unconditionally and conditional on past volatility and other controls. Fourth, greater clarity as to jump reason also foreshadows lower volatility. Clarity in this sense has trended upwards over the past century. Finally, and excluding U.S. jumps, leading newspapers attribute one-third of jumps in their own national stock markets to developments that originate in or relate to the United States. The U.S. role in this regard dwarfs that of Europe and China.

Biography

Nick Bloom is a Professor in the Department of Economics at Stanford University and Professor, by courtesy, at the Graduate School of Business. He is also the Co-Director of the Productivity, Innovation and Entrepreneurship program at the National Bureau of Economic Research (NBER), and a fellow of the Centre for Economic Performance, and the Stanford Institute for Economic Policy Research. After completing his PhD at University College London, Nick worked as a business tax policy advisor to the UK Treasury, and then joined McKinsey & Company as a management consultant. In 2003 he moved to the London School of Economics to focus on research, before joining Stanford University in 2005. Professor Bloom’s research focuses on measuring and explaining management practices. He has been working with McKinsey & Company as part of a long-run effort to collect management data from over 10,000 firms across industries and countries. The aim is to build an empirical basis for understanding what factors drive differences in management practices across regions, industries and countries, and how this determines firm and national performance. More recently he has also been working with Accenture on running management experiments. He also works on understanding the impacts of large uncertainty shocks—such as the credit crunch, the 9/11 terrorist attacks and the Cuban Missile crisis—on the US economy, for which he won the Frisch Medal in 2010.

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Further information: business-events@glasgow.ac.uk 

First published: 12 January 2022