Journal
JOURNAL OF FINANCIAL ECONOMICS
Volume 145, Issue 3, Pages 1006-1024Publisher
ELSEVIER SCIENCE SA
DOI: 10.1016/j.jfineco.2021.09.012
Keywords
Macro news; Earnings announcements; Market efficiency; Investor attention; Complementary relationship
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This study examines the impact of macro-news on the stock market's ability to incorporate firm-level earnings information and finds that on macro-news days, announcement returns are more sensitive to earnings news and the post-earnings announcement drift effect is weaker, contrary to the existing theory of attention substitution.
We study how the arrival of macro-news affects the stock market's ability to incorpo-rate 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 an-nouncements. 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.(c) 2021 Elsevier B.V. All rights reserved.
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