When Can the Market Identify Stale News?

41 Pages Posted: 7 May 2014 Last revised: 22 Oct 2018

See all articles by Anastassia Fedyk

Anastassia Fedyk

University of California, Berkeley - Haas School of Business

James Hodson

Jožef Stefan Institute

Date Written: October 12, 2017

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

Suggested Citation

Fedyk, Anastassia and Hodson, James, When Can the Market Identify Stale News? (October 12, 2017). Available at SSRN: https://ssrn.com/abstract=2433234 or http://dx.doi.org/10.2139/ssrn.2433234

Anastassia Fedyk (Contact Author)

University of California, Berkeley - Haas School of Business ( email )

545 Student Services Building, #1900
2220 Piedmont Avenue
Berkeley, CA 94720
United States

James Hodson

Jožef Stefan Institute ( email )

Jamova cesta 39
Ljubljana, 1000
Slovenia

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

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