The Attention Trigger Effect: Macro News and Efficient Processing of Micro News

65 Pages Posted: 28 Dec 2016 Last revised: 5 Sep 2019

See all articles by David A. Hirshleifer

David A. Hirshleifer

University of California, Irvine - Paul Merage School of Business; NBER

Jinfei Sheng

University of California, Irvine - Paul Merage School of Business

Date Written: September 4, 2019

Abstract

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

Hirshleifer, David A. and Sheng, Jinfei, The Attention Trigger Effect: Macro News and Efficient Processing of Micro News (September 4, 2019). Available at SSRN: https://ssrn.com/abstract=2890864 or http://dx.doi.org/10.2139/ssrn.2890864

David A. Hirshleifer

University of California, Irvine - Paul Merage School of Business ( email )

Irvine, CA California 92697-3125
United States

HOME PAGE: http://sites.uci.edu/dhirshle/

NBER ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Jinfei Sheng (Contact Author)

University of California, Irvine - Paul Merage School of Business ( email )

4291 Pereira Dr
Irvine, CA 92697
United States

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

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