Ashok Banerjee,IIM Calcutta
Research at Finance Lab of IIM Calcutta, shows that the effect of any news on the market depends on the attention of investors. If the attention of investors were somewhere else, even news carrying strong positive/negative sentiment would go unnoticed or would be penalized. This is particularly true in the case of major non-market attention grabbing events. In other words, attention overwhelms the effect of sentiment. Processing any attention-grabbing event requires effort. If that effort is directed towards particular information, people are reluctant to make the extra effort to process any other information at the same time, no matter how much sentiment that information might carry.
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