Working Paper: NBER ID: w28931
Authors: David Hirshleifer; Jinfei Sheng
Abstract: We study how the arrival of macro-news affects the stock market’s ability to incorporate the information in firm-level earnings announcements. Existing theories suggest that macro and firm-level earnings news are attention substitutes; macro-news announcements crowd out firm-level attention, causing less efficient processing of firm-level earnings announcements. We find the opposite: the sensitivity of announcement returns to earnings news is 17% stronger, and post-earnings announcement drift 71% weaker, on macro-news days. This suggests a complementary relationship between macro and micro news that is consistent with either investor attention or information transmission channels.
Keywords: macro news; micro news; stock prices; investor attention; market efficiency
JEL Codes: E44; G02; G12; G14; G4
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| macro news (E60) | immediate price reaction to earnings surprises (G14) |
| macro news (E60) | post-earnings announcement drift (G14) |
| macro news (E60) | investor attention toward firm-level news (G14) |
| macro news (E60) | efficiency of stock price reactions to firm-specific news (G14) |