Concurrent Earnings Announcements and the Allocation of Investor Attention

Abstract

Information choice models predict that investors should prioritize the processing of aggregate over firm-specific information, yet recent empirical evidence documents a complementary relation between these two types of information. We reconcile this apparent disconnect by showing that investors treat aggregate and firm-specific information as substitutes when their information processing capacity is constrained, a key assumption in information choice models. We show that when investors are capacity constrained, namely on busy earnings announcement days, they acquire more macroeconomic information and trade securities exposed to macroeconomic uncertainty more extensively. Moreover, on these days aggregate uncertainty declines while firm-specific uncertainty increases.