The Attention Trigger Effect: Macro News and Efficient Processing of Micro News
65 Pages Posted: 28 Dec 2016 Last revised: 5 Sep 2019
Date Written: September 4, 2019
Investors allocate attention between competing activities and signals. Existing theories suggest that macro-news announcements crowd out attention to firm-level news, causing greater market underreaction to 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. Furthermore, institutional investor attention to firm-level news, as proxied by online search activity, is higher on macro-news days. So instead of distracting investors, macro-news induces more efficient pricing of individual stocks. We call this the attention trigger effect.
Keywords: macro news, earnings announcements, market efficiency, investor attention
JEL Classification: G12, G14, G02
Suggested Citation: Suggested Citation