Stale Information in the Spotlight: The Effects of Attention Shocks on Equity Markets
73 Pages Posted: 9 Sep 2020
Date Written: August 21, 2020
Using a novel natural experiment, we provide causal evidence on how asset prices are affected when the media draws investor attention to stale information. We find that shortly after the announcement of a high-profile financial analyst award, stocks with preexisting recommendations from analysts who receive heightened media exposure from winning the award experience higher abnormal returns than those recommended by analysts who barely lose the award. Attention trading rather than ability signaling drives the differences in the returns. Furthermore, the award changes brokerages’ resource allocation and analysts’ information production, thereby having long-lasting effects on equity markets.
Keywords: Media attention, Stale information, Financial analyst
JEL Classification: G14, G12, G41
Suggested Citation: Suggested Citation