Stale Economic News, Media and the Stock Market

37 Pages Posted: 26 Aug 2012 Last revised: 21 Jul 2014

Gene Birz

Southern Connecticut State University - Department of Economics and Finance

Date Written: July 2014

Abstract

I employ a classification of headlines from 389 newspapers and wire services to examine whether stale economic 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 a strong, 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 support the hypothesis that investors overreact to stale economic news reported in newspapers.

Keywords: Media, stale information, macroeconomic announcements, attention, efficient markets

JEL Classification: G12, G14, E44

Suggested Citation

Birz, Gene, Stale Economic News, Media and the Stock Market (July 2014). Available at SSRN: https://ssrn.com/abstract=2136291 or http://dx.doi.org/10.2139/ssrn.2136291

Gene Birz (Contact Author)

Southern Connecticut State University - Department of Economics and Finance ( email )

New Haven, CT 06515
United States

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