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Debt and Equity Market Reaction to Employment Reports

Author

Listed:
  • Asim Ghosh

    (Indian Institute of Management, Joka, Kolkata 700104, India)

  • Ronnie Clayton

    (Jacksonville State University, 700 Pelham Rd. N., Jacksonville, AL 36265, USA)

Abstract

Several researchers have recently shown an interaction between macroeconomic variables and stock returns. Most of these studies have concentrated on interest rates and inflation. These and other variables, of course, have an influence on the debt markets as well. Other variables that can influence the debt and equity markets include employment information. On the first Friday of each month the government releases its employment report for the previous month. Strong growth in employment generally bodes well for economic output and growth in the economy. Any inflation and interest rate implications of a strong employment report will ultimately be reflected in bond and stock prices. It is generally observed that if payroll employment growth is moderately strong prices in the bond market drop while prices in the stock market rise. The empirical evidence presented supports these observations. This study documents the reaction of the bond and the stock markets in response to the employment reports. As the unemployment rate tends to rise so do the bond and the stock markets.

Suggested Citation

  • Asim Ghosh & Ronnie Clayton, 2006. "Debt and Equity Market Reaction to Employment Reports," Review of Pacific Basin Financial Markets and Policies (RPBFMP), World Scientific Publishing Co. Pte. Ltd., vol. 9(03), pages 431-440.
    • Handle: RePEc:wsi:rpbfmp:v:09:y:2006:i:03:n:s0219091506000835
    DOI: 10.1142/S0219091506000835
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    Citations

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    Cited by:

    1. Thomas Chiang & Jiandong Li & Sheng-Yung Yang, 2015. "Dynamic stock–bond return correlations and financial market uncertainty," Review of Quantitative Finance and Accounting, Springer, vol. 45(1), pages 59-88, July.
    2. Chung Baek, 2016. "Stock prices, dividends, earnings, and investor sentiment," Review of Quantitative Finance and Accounting, Springer, vol. 47(4), pages 1043-1061, November.

    More about this item

    Keywords

    Employment; unemployment; debt; equity; causality; time-series; cointegration;
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • G2 - Financial Economics - - Financial Institutions and Services
    • G3 - Financial Economics - - Corporate Finance and Governance

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