Macro News and Micro News: Complements or Substitutes?

We study how the arrival of macro-news affects the stock market’s ability to incorporate the information in firm-level earnings announcements. Existing theories suggest that macro and firm-level earnings news are attention substitutes; macro-news announcements crowd out firm-level attention, causing less efficient processing of firm-level earnings announcements. We find the opposite: the sensitivity of announcement returns to earnings news is 17% stronger, and post-earnings announcement drift 71% weaker, on macro-news days. This suggests a complementary relationship between macro and micro news that is consistent with either investor attention or information transmission channels.

Keywords: macro news, earnings announcements, market efficiency, investor attention, complementary relationship

JEL Classification: G12, G14, G02

Suggested Citation: Suggested Citation

Hirshleifer, David A. and Sheng, Jinfei, Macro News and Micro News: Complements or Substitutes? (August 21, 2021). Journal of Financial Economics (JFE), Forthcoming, Available at SSRN: https://ssrn.com/abstract=2890864 or http://dx.doi.org/10.2139/ssrn.2890864