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Acquisition of information and share prices: An empirical investigation of cognitive dissonance

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  • Elena Argentese
  • Helmut Luetkepohl
  • Massimo Motta

Abstract

This paper deals with the determinants of agents’ acquisition of information. Our econometric evidence shows that the general index of Italian share-prices and the series of Italy’s financial newspaper sales are cointegrated, and the former series Granger-causes the latter, thereby giving support to the cognitive dissonance hypothesis: (non-professional) agents tend to buy the newspaper when share prices are high and not to buy it when share prices are low. Instead, we do not find support for the hypothesis that the agents acquire information in order to trade in the stock-market: we find no relationship between quantities exchanged in the market and newspaper sales, nor between stock market volatility and newspaper sales.

Suggested Citation

  • Elena Argentese & Helmut Luetkepohl & Massimo Motta, 2006. "Acquisition of information and share prices: An empirical investigation of cognitive dissonance," Economics Working Papers ECO2006/32, European University Institute.
    • Handle: RePEc:eui:euiwps:eco2006/32
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    Cited by:

    1. M. Middeldorp & S. Rosenkranz, 2008. "Information acquisition in an experimental asset market," Working Papers 08-25, Utrecht School of Economics.
    2. Abreu, Margarida & Mendes, Victor, 2012. "Information, overconfidence and trading: Do the sources of information matter?," Journal of Economic Psychology, Elsevier, vol. 33(4), pages 868-881.
    3. Riccardo Ferretti & Andrea Cipollini & Francesco Pattarin, 2016. "Can an unglamorous non-event affect prices? The role of newspapers," Cogent Economics & Finance, Taylor & Francis Journals, vol. 4(1), pages 1142847-114, December.
    4. Bellofatto, Anthony & Broihanne, Marie-Hélène & D'Hondt, Catherine, 2019. "Appetite for information and trading behavior," LIDAM Discussion Papers LFIN 2019002, Université catholique de Louvain, Louvain Finance (LFIN).
    5. Riccardo Ferretti & Francesco Pattarin, 2008. "Is public information really public? The role of newspapers," Centro Studi di Banca e Finanza (CEFIN) (Center for Studies in Banking and Finance) 0008, Universita di Modena e Reggio Emilia, Dipartimento di Economia "Marco Biagi".
    6. repec:use:tkiwps:2525 is not listed on IDEAS
    7. Mark Bowden, 2015. "A model of information flows and confirmatory bias in financial markets," Decisions in Economics and Finance, Springer;Associazione per la Matematica, vol. 38(2), pages 197-215, October.
    8. Riccardo Ferretti & Francesco Pattarin, 2008. "Is public information really public? The role of newspapers," Centro Studi di Banca e Finanza (CEFIN) (Center for Studies in Banking and Finance) 08013, Universita di Modena e Reggio Emilia, Dipartimento di Economia "Marco Biagi".
    9. Diefeng Peng & Yulei Rao & Mei Wang, 2016. "Do Top 10 Lists of Daily Stock Returns Attract Investor Attention? Evidence from a Natural Experiment," International Review of Finance, International Review of Finance Ltd., vol. 16(4), pages 565-593, December.
    10. Joshy Easaw & Atanu Ghoshray & Saeed Heravi, 2014. "Households' Forming Subjective Expectations Using Perceived News: Do Shocks to ‘Good’ News Matter More Than ‘Bad’ News?," Manchester School, University of Manchester, vol. 82(1), pages 1-16, January.

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    JEL classification:

    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)

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