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Stale economic news, media and the stock market

Gene Birz

Journal of Economic Psychology, 2017, vol. 61, issue C, 87-102

Abstract: I employ a classification of headlines from newspapers and wire services to examine whether stale macroeconomic news affects stock prices. Unlike with individual stocks, the cost of obtaining information about major economic releases is relatively low. Thus, stock prices should adjust to economic news announcements prior to their coverage in newspapers. I find statistically and economically significant relationship between stale news stories on unemployment and next week’s S&P 500 returns. This effect is then completely reversed during the following week. These findings show that investors are affected by salient information and support the hypothesis that investors overreact to stale macroeconomic news reported in newspapers.

Keywords: Macroeconomic announcements; Attention; Salience; Efficient markets; Media (search for similar items in EconPapers)
JEL-codes: G12 G14 E44 (search for similar items in EconPapers)
Date: 2017
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