Economic Uncertainty and Investor Attention

This paper develops a multi-firm equilibrium model of information acquisition based on differences in firms' characteristics. It is shown that higher market-level uncertainty crowds-in investor attention to firm-level earnings announcements. Increased investor attention magnifies the earnings response coefficients of all announcing firms, but firms react differently to the increase in attention (e.g., firms with higher systematic risk attract more investor attention and their prices react more to earnings announcements). The implications of the model for the cross section of firms are tested using data on firm-level attention and return measures around earnings announcements.