Government Distrust and Stock Market

Fatima Zahra Filali Adib, Massimo Massa and Hong Zhang

No 19393, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Do discrepancies between public media coverage and government-reported macro news affect attitudes toward micro-level information? We document that government distrust, specifically in relation to government-reported macro news, introduces a negative bias in how the market reacts to firm-specific news. This bias is not observed when the news is disseminated by the media. The impact is particularly pronounced over the long term and more significant for firms closely affiliated with the government. Our exploration using natural disasters provides support for a causal interpretation. These results suggest that governmental actions may contribute to broader economic uncertainty extending beyond conventional policy dimensions.

Keywords: Disagreement; Trust (search for similar items in EconPapers)
JEL-codes: G23 (search for similar items in EconPapers)
Date: 2024-08
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