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Information Consumption and Asset Pricing
Author(s) -
BENREPHAEL AZI,
CARLIN BRUCE I.,
DA ZHI,
ISRAELSEN RYAN D.
Publication year - 2021
Publication title -
the journal of finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 18.151
H-Index - 299
eISSN - 1540-6261
pISSN - 0022-1082
DOI - 10.1111/jofi.12975
Subject(s) - capital asset pricing model , proxy (statistics) , risk premium , ex ante , consumption (sociology) , construct (python library) , economics , consumption based capital asset pricing model , asset (computer security) , business , financial economics , systematic risk , monetary economics , computer science , social science , computer security , machine learning , sociology , macroeconomics , programming language
We study whether firm and macroeconomic announcements that convey systematic information generate a return premium for firms that experience information spillovers. We use information consumption to proxy for investor learning during these announcements and construct ex ante measures of expected information consumption (EIC) to calibrate whether learning is priced. On days when there are information spillovers, affected stocks earn a significant return premium (5% annualized) and the capital asset pricing model performs better. The positive effect of the Federal Reserve Open Market Committee announcements on the risk premia of individual stocks appears to be modulated by EIC. Our findings are most consistent with a risk‐based explanation.