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Estimating the Structure of Market Reaction to News: Information Events and Lumber Futures Prices
Author(s) -
Rucker Randal R.,
Thurman Walter N.,
Yoder Jonathan K.
Publication year - 2005
Publication title -
american journal of agricultural economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.949
H-Index - 111
eISSN - 1467-8276
pISSN - 0002-9092
DOI - 10.1111/j.1467-8276.2005.00736.x
Subject(s) - futures contract , aperiodic graph , event study , event (particle physics) , futures market , inside information , business , economics , econometrics , financial economics , agricultural economics , geography , mathematics , context (archaeology) , physics , archaeology , combinatorics , quantum mechanics
We develop a new event‐study technique, the distributional event response model (DERM), appropriate to relatively slowly evolving information events. We apply the model to twelve years of daily lumber futures prices and analyze the effects of three different types of information releases: ( a ) monthly housing starts estimates, ( b ) aperiodic administrative and judicial announcements about U.S.‐Canada trade disputes, and ( c ) novel and unprecedented court decisions related to the Endangered Species Act (ESA). The information releases are different in ways that predict their relative speeds of impoundment in prices. We find that housing start events are absorbed more quickly than trade events, which are absorbed more quickly than ESA events.