Macro News and Micro News: Complements or Substitutes?
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.
We thank Markus Baldauf, Jan Bena, Vincent Bogousslavsky, Oliver Boguth, Murray Carlson, Nuno Clara (discussant), Jack Favilukis, Adlai Fisher, Ron Giammarino, Thomas Gilbert, Will Gornall, Alexander Hillert (discussant), Shiyang Huang, Kai Li, Russell Lundholm, Christoph Meinerding (discussant), Carolin Pflueger, Pavel Savor (discussant), Yushui Shi, Eric Swanson, Joshua Thornton, Selim Topaloglu (discussant), Wanyi Wang, Liyan Yang, Alminas Zaldokas (discussant), and seminar and conference participants at the University of British Columbia, University of Sydney, European Finance Association Conference, RCFS/RAPS Conference, Conference on Financial Economics and Accounting (Tulane University), American Finance Association Conference Poster Session, Northern Finance Association Conference, Yale Whitebox Advisor Behavioral Finance Conference, LBS TADC, and Financial Management Association Conference for helpful comments. We thank Michael Drake for sharing the daily Google Search Volume data. We thank Yichun He, Joshua Thornton, Yushui Shi, and Wanyi Wang for excellent research assistance. Jinfei Sheng gratefully acknowledges the financial support from the Canadian Securities Institute Research Foundation. Earlier versions of this paper were circulated under the title “Macro News, Micro News, and Stock Prices.” The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.