Tomorrow’s fish and chip paper? Slowly incorporated news and the cross-section of stock returns
Tao, R., Brooks, C.
It is advisable to refer to the publisher's version if you intend to cite from this work. See Guidance on citing. To link to this item DOI: 10.1080/1351847X.2020.1846575 Abstract/SummaryThe link between news and investor decision making is widely discussed in the litera- ture. Utilising unique U.S. firm-level news data between 1979 and 2016, we document a cross-sectional difference in the speed of the diffusion of information contained in news. We distinguish news articles as being either slowly or quickly incorporated into contemporaneous stock prices. The return spread between stocks classified according to these two types of news yields a statistically significant profit of 139 basis points per month. This abnormal return cannot be explained by other well-known risk factors and is robust when allowing for trading costs. Overall, our research refines the role of news regarding information dissemination in the financial markets.
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