discounting the news

Discounting the news

An adjustment of a stock's price as speculators bid the price up or down in anticipation of news about the company, whether good or bad.

Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

Discounting the News

Describing a situation in which the market has already incorporated expected information into the price of a stock. That is, if a company's earnings are large for a particular quarter, it may leak the information so that investors discount the news, reducing the pressure for an unsustainable jump in price when the earnings are actually announced. For this reason, the Federal Reserve issues statements indicating what policy changes it might make before it makes them, allowing the markets to adjust before the announcement.

Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved

discounting the news

Adjusting a security's price so that it already reflects some anticipated event or series of events. For example, a stock price may be unaffected by a favorable earnings report because the report was expected. Likewise, a bond's price may not fall on a rating downgrade because investors anticipated the downgrade and had priced the bond to discount the event.

Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.