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Demand for Information, Uncertainty, and the Response of U.S. Treasury Securities to News
[Optimal inattention to the stock market]

Author

Listed:
  • Hedi Benamar
  • Thierry Foucault
  • Clara Vega

Abstract

We use clickstream data to show that investors’ demand for information about macroeconomic factors affecting the path of future interest rates is a measure of their uncertainty about this path. In particular, an increase in information demand ahead of influential economic announcements affecting investors’ beliefs about future interest rates predicts a stronger reaction of U.S. Treasury note yields to these announcements, as it should if information demand positively covaries with uncertainty. This relationship does not vanish after using standard measures of uncertainty as predictors, suggesting that clickstream data contain unique information about investors’ uncertainty.

Suggested Citation

  • Hedi Benamar & Thierry Foucault & Clara Vega, 2021. "Demand for Information, Uncertainty, and the Response of U.S. Treasury Securities to News [Optimal inattention to the stock market]," The Review of Financial Studies, Society for Financial Studies, vol. 34(7), pages 3403-3455.
    • Handle: RePEc:oup:rfinst:v:34:y:2021:i:7:p:3403-3455.
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    File URL: http://hdl.handle.net/10.1093/rfs/hhaa072
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    Citations

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    Cited by:

    1. Hu, Grace Xing & Pan, Jun & Wang, Jiang & Zhu, Haoxiang, 2022. "Premium for heightened uncertainty: Explaining pre-announcement market returns," Journal of Financial Economics, Elsevier, vol. 145(3), pages 909-936.
    2. Alexander Jung & Patrick Kuehl, 2021. "Can central bank communication help to stabilise inflation expectations?," Scottish Journal of Political Economy, Scottish Economic Society, vol. 68(3), pages 298-321, July.
    3. Lorraine Eden & Stewart R. Miller & Sarfraz Khan & Robert J. Weiner & Dan Li, 2022. "The event study in international business research: Opportunities, challenges, and practical solutions," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 53(5), pages 803-817, July.
    4. Andrei, Daniel & Friedman, Henry & Ozel, N. Bugra, 2023. "Economic uncertainty and investor attention," Journal of Financial Economics, Elsevier, vol. 149(2), pages 179-217.
    5. Michael D Bauer & Aeimit Lakdawala & Philippe Mueller, 2022. "Market-Based Monetary Policy Uncertainty," The Economic Journal, Royal Economic Society, vol. 132(644), pages 1290-1308.
    6. Adlai Fisher & Charles Martineau & Jinfei Sheng, 2022. "Macroeconomic Attention and Announcement Risk Premia," The Review of Financial Studies, Society for Financial Studies, vol. 35(11), pages 5057-5093.
    7. Du, Xiuli & Ao, Zhu & Chai, Yiwei & Ge, Shilong, 2023. "Economic policy uncertainty, investor attention and post-earnings announcement drift," International Review of Financial Analysis, Elsevier, vol. 87(C).
    8. Gardner, Ben & Scotti, Chiara & Vega, Clara, 2022. "Words speak as loudly as actions: Central bank communication and the response of equity prices to macroeconomic announcements," Journal of Econometrics, Elsevier, vol. 231(2), pages 387-409.
    9. Neilson, Jed J., 2022. "Investor information gathering and the resolution of uncertainty," Journal of Accounting and Economics, Elsevier, vol. 74(1).
    10. Bennett Schmanski & Chiara Scotti & Clara Vega, 2023. "Fed Communication, News, Twitter, and Echo Chambers," Finance and Economics Discussion Series 2023-036, Board of Governors of the Federal Reserve System (U.S.).
    11. Hou, Yunfei & Hu, Changsheng, 2023. "Understanding the role of aggregate analyst attention in resolving stock market uncertainty," Finance Research Letters, Elsevier, vol. 57(C).
    12. Martineau, Charles & Mondria, Jordi, 2022. "News Selection and Asset Pricing Implications," SocArXiv ame2f, Center for Open Science.

    More about this item

    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
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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