Media Attention, Macroeconomic Fundamentals, and the Stock Market

2016 ASU Sonoran Winter Finance Conference

2016 Northern Finance Association Conference

2016 China International Conference in Finance

2017 Financial Intermdiation Research Society Conference

66 Pages Posted: 15 Dec 2015 Last revised: 30 May 2017

Adlai J. Fisher

University of British Columbia (UBC) - Sauder School of Business

Charles Martineau

University of British Columbia, Sauder School of Business, Students

Jinfei Sheng

University of British Columbia, Sauder School of Business

Date Written: May 28, 2017

Abstract

We construct indices of media attention to macroeconomic risks including employment, growth, inflation, monetary policy, and oil prices. Attention rises around macroeconomic announcements and following changes in fundamentals over quarterly, annual, and business cycle horizons. The effect is asymmetric, with bad news raising attention more than good news. Attention relates to the stock market in two ways. First, increases in aggregate trade volume and volatility coincide with rising attention, controlling for announcements. Second, changes in attention prior to unemployment and FOMC announcements predict announcement surprises, stock returns, and implied volatility changes on the announcement day. We conclude that media attention to macroeconomic fundamentals provides market-relevant information beyond the contents and dates of macroeconomic announcements.

Keywords: Attention Dynamics, Macroeconomic Fundamentals, Stock Market

JEL Classification: G12, E20

Suggested Citation

Fisher, Adlai J. and Martineau, Charles and Sheng, Jinfei, Media Attention, Macroeconomic Fundamentals, and the Stock Market (May 28, 2017). 2016 Northern Finance Association Conference; 2016 China International Conference in Finance; 2017 Financial Intermdiation Research Society Conference. Available at SSRN: https://ssrn.com/abstract=2703978

Adlai J. Fisher (Contact Author)

University of British Columbia (UBC) - Sauder School of Business ( email )

2053 Main Mall
Vancouver, BC V6T 1Z2
Canada
604-822-8331 (Phone)
604-822-4695 (Fax)

HOME PAGE: http://finance.sauder.ubc.ca/~fisher

Charles Martineau

University of British Columbia, Sauder School of Business, Students ( email )

Vancouver
Canada

HOME PAGE: http://www.charlesmartineau.com

Jinfei Sheng

University of British Columbia, Sauder School of Business ( email )

2053 Main Mall
Vancouver, British Columbia V6T 1Z2
Canada

HOME PAGE: http://sites.google.com/site/shengjinfei/

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