Information Consumption and Asset Pricing

43 Pages Posted: 14 Jul 2017 Last revised: 9 Feb 2019

See all articles by Azi Ben-Rephael

Azi Ben-Rephael

Rutgers University, Newark, School of Business-Newark, Department of Finance & Economics

Bruce I. Carlin

University of California, Los Angeles (UCLA) - Anderson School of Management

Zhi Da

University of Notre Dame - Mendoza College of Business

Ryan D. Israelsen

Michigan State University - Department of Finance

Multiple version iconThere are 2 versions of this paper

Date Written: January 31, 2019

Abstract

We construct measures of expected information consumption (EIC) to test whether information processing by investors is associated with a risk premium. We show that most expected information processing about individual firms occurs during spillovers, when peer firm or macroeconomic announcements occur. On days when institutions are expected to consume information, stocks earn a significant risk premium (10% annualized) and the CAPM performs better. The positive effect of FOMC announcements on the risk premia for individual stocks is modulated by the expected information consumption by institutional investors. In contrast, expected retail information consumption has little effect on asset prices.

Keywords: Information, Asset Prices, Risk Premia

JEL Classification: G12

Suggested Citation

Ben-Rephael, Azi and Carlin, Bruce I. and Da, Zhi and Israelsen, Ryan D., Information Consumption and Asset Pricing (January 31, 2019). Available at SSRN: https://ssrn.com/abstract=3002339 or http://dx.doi.org/10.2139/ssrn.3002339

Azi Ben-Rephael (Contact Author)

Rutgers University, Newark, School of Business-Newark, Department of Finance & Economics ( email )

111 Washington Avenue
Newark, NJ 07102
United States

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

Bruce I. Carlin

University of California, Los Angeles (UCLA) - Anderson School of Management ( email )

110 Westwood Plaza
Los Angeles, CA 90095-1481
United States

Zhi Da

University of Notre Dame - Mendoza College of Business ( email )

Notre Dame, IN 46556-5646
United States

Ryan D. Israelsen

Michigan State University - Department of Finance ( email )

315 Eppley Center
East Lansing, MI 48824-1122
United States

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