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Stale economic news, media and the stock market

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  • Birz, Gene

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.

Suggested Citation

  • Birz, Gene, 2017. "Stale economic news, media and the stock market," Journal of Economic Psychology, Elsevier, vol. 61(C), pages 87-102.
    • Handle: RePEc:eee:joepsy:v:61:y:2017:i:c:p:87-102
    DOI: 10.1016/j.joep.2017.03.002
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    Cited by:

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    2. Likittanawong Supawat & Leemakdej Arnat, 2023. "Market Reaction to Corporate Releases and News Articles: Evidence from Thailand’s Stock Market," IJFS, MDPI, vol. 11(3), pages 1-27, September.
    3. Xiaohong Shen & Gaoshan Wang & Yue Wang & Alfred Peris, 2021. "The Influence of Research Reports on Stock Returns: The Mediating Effect of Machine-Learning-Based Investor Sentiment," Discrete Dynamics in Nature and Society, Hindawi, vol. 2021, pages 1-14, December.
    4. Wang, Gaoshan & Yu, Guangjin & Shen, Xiaohong, 2021. "The effect of online environmental news on green industry stocks: The mediating role of investor sentiment," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 573(C).
    5. Pok, Wei Fong & Humayun Kabir, M. & Young, Martin, 2022. "Investor sentiment and mean-variance relation: Evidence from emerging futures markets," Finance Research Letters, Elsevier, vol. 46(PB).
    6. Gene Birz & Sandip Dutta & Han Yu, 2022. "Economic forecasts, anchoring bias, and stock returns," Financial Management, Financial Management Association International, vol. 51(1), pages 169-191, March.

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    More about this item

    Keywords

    Macroeconomic announcements; Attention; Salience; Efficient markets; Media;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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