Announcement Effect


Announcement Effect

A change in security prices or volatility as a result of some announcement. For example, if the Federal Reserve raises interest rates, stock prices are liable to fall. Likewise, if a company announces an acquisition, its stock may rise. The announcement effect may cause drastic price changes; as a result, companies and governments often selectively leak or hint at announcements before they occur to minimize surprises. The announcement effect is also called the signal effect. See also: Price out the News.