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When Can the Market Identify Stale News?

41 Pages Posted: 7 May 2014 Last revised: 15 Oct 2017

Anastassia Fedyk

Harvard University, Harvard Business School

James Hodson

Jožef Stefan Institute

Date Written: July 8, 2017

Abstract

Why do investors react to old information? We conjecture that it is cognitively difficult to identify old content combined from multiple sources. We use a unique dataset of 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, the 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

Suggested Citation

Fedyk, Anastassia and Hodson, James, When Can the Market Identify Stale News? (July 8, 2017). Available at SSRN: https://ssrn.com/abstract=2433234 or http://dx.doi.org/10.2139/ssrn.2433234

Anastassia Fedyk (Contact Author)

Harvard University, Harvard Business School ( email )

Cambridge, MA
United States

James Hodson

Jožef Stefan Institute ( email )

Jamova 39
1000 Ljubljana
Slovenia

HOME PAGE: http://ailab.ijs.si

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