When Can the Market Identify Old News?

53 Pages Posted: 7 May 2014 Last revised: 7 Aug 2019

See all articles by Anastassia Fedyk

Anastassia Fedyk

University of California, Berkeley - Haas School of Business

James Hodson

Jožef Stefan Institute

Date Written: June 30, 2019

Abstract

Why do investors react to old information? We provide survey evidence to experimentally document that active finance professionals are more susceptible to old information when it comes as a recombination of content from multiple sources. To evaluate the market implications of this mechanism, we exploit a comprehensive dataset of news passing through the Bloomberg terminal. Recombination of old information prompts larger price moves and subsequent reversals than direct reprints of old stories. Furthermore, while overall reactions to old information have declined over time, differential reactions to recombination stories have risen. Altogether, we document investors' increased sophistication in discarding simple reprints but continuing susceptibility to recombination of old information.

Keywords: news, information processing, investor inattention

JEL Classification: G1, N2

Suggested Citation

Fedyk, Anastassia and Hodson, James, When Can the Market Identify Old News? (June 30, 2019). 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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