What Triggers Stock Market Jumps
Abstract
We examine next-day newspaper accounts of large daily jumps in 16 national stock markets toassess 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.