37 Pages Posted: 26 Aug 2012 Last revised: 21 Jul 2014
Date Written: July 2014
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: Suggested Citation