Public attention to macroeconomic announcements and stock market reaction: evidence from Turkey

What the paper says

Purpose This study examines whether increases in preannouncement attention can predict increases in stock returns or decreases in future volatility around monetary, inflation and employment announcements in the Turkish stock market. Design/methodology/approach We regress announcement-day stock returns and postannouncement 30-day realized volatility on preannouncement attention separately. For monetary announcements, we also check the stock response on the day before announcements. Lastly, we regress postannouncement attention on positive and negative announcement day returns to determine which one attracts greater attention. Findings The results show that preannouncement attention positively predicts stock returns on monetary announcement days, but not on inflation and employment announcement days. Attention cannot predict any premonetary stock response. Positive returns on monetary and inflation announcement days attract higher postannouncement attention. Research limitations/implications While we can study price effects on the day before monetary announcements, the lack of intraday data prevents us from examining the hours immediately preceding them. Practical implications This analysis can reveal the effect of public (individual) attention on announcement premium, which is rarely examined in the literature. Social implications By monitoring Google search volume, individual investors can detect signals about upcoming announcements and capture the associated risk premium around announcement days. Originality/value We provide early evidence supporting Fisher et al.’s (2022) attention-based explanation of the announcement premium. By examining individual attention, we offer one of the earliest tests of this mechanism outside the institutional setting.