IDEAS home Printed from https://ideas.repec.org/p/cpr/ceprdp/19585.html

What Hundreds of Economic News Events Say About Belief Overreaction in the Stock Market

Author

Listed:
  • Bianchi, Francesco
  • Ludvigson, Sydney
  • MA, Sai

Abstract

We measure the nature and severity of a variety of belief distortions in market reactions to hundreds of economic news events using a new methodology that synthesizes estimation of a structural asset pricing model with algorithmic machine learning to quantify bias. We estimate that investors systematically overreact to perceptions about multiple fundamental shocks in a macro-dynamic system, generating asymmetric compositional effects when real-world events produce conflicting signals with counteracting market implications. We show that such events can lead the market to underreact to news, even when investors overreact to all shocks.

Suggested Citation

  • Bianchi, Francesco & Ludvigson, Sydney & MA, Sai, 2024. "What Hundreds of Economic News Events Say About Belief Overreaction in the Stock Market," CEPR Discussion Papers 19585, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:19585
    as

    Download full text from publisher

    File URL: https://cepr.org/publications/DP19585
    Download Restriction: no
    ---><---

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cpr:ceprdp:19585. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: CEPR (email available below). General contact details of provider: https://cepr.org/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.