The Inefficient Pricing of News

The stock market fails to efficiently process information in news text (Chen et al., 2026). But news itself is highly predictable by prevailing stock characteristics, which complicates inferences about market efficiency. After purging news of its predictable content, the remaining “pure news” more than doubles the monthly return predictive power of raw news, and it continues to significantly predict returns up to 18 months ahead. The magnitude and longevity of the pure news anomaly is greater than those of every anomaly in the Jensen et al. (2022) universe. It derives from negative-tone and quantitative topics to which investors underreact and from high-attention and ambiguous topics to which investors overreact.