Macro News and Micro News: Complements or Substitutes?
53 Pages Posted: 28 Dec 2016 Last revised: 7 Oct 2021
There are 2 versions of this paper
Macro News and Micro News: Complements or Substitutes?
Macro News and Micro News: Complements or Substitutes?
Date Written: August 21, 2021
Abstract
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