When Can the Market Identify Stale News?

Abstract

Why do investors react to old information? We posit that it is cognitively difficult to identify old content combined from multiple sources. We use a unique dataset of all news passing through the Bloomberg terminal to differentiate "recombination" stories that draw content from several sources from direct "reprints." Firms see larger price moves on days when they have more recombination stories relative to reprints. Furthermore, while overall reactions to old information have declined over time, differential reactions to recombination stories have risen. Altogether, these results point to investors' increased sophistication in discarding reprints, but continuing susceptibility to recombination of old information

Keywords: news, information processing, investor inattention, capital markets

JEL Classification: G1, N2