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Government Distrust and Stock Market

Author

Listed:
  • Filali Adib, Fatima Zahra
  • Massa, Massimo
  • Zhang, Hong

Abstract

Do discrepancies between public media coverage and government-reported macro news affect attitudes toward micro-level information? We document that government distrust, specifically in relation to government-reported macro news, introduces a negative bias in how the market reacts to firm-specific news. This bias is not observed when the news is disseminated by the media. The impact is particularly pronounced over the long term and more significant for firms closely affiliated with the government. Our exploration using natural disasters provides support for a causal interpretation. These results suggest that governmental actions may contribute to broader economic uncertainty extending beyond conventional policy dimensions.

Suggested Citation

  • Filali Adib, Fatima Zahra & Massa, Massimo & Zhang, Hong, 2024. "Government Distrust and Stock Market," CEPR Discussion Papers 19393, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:19393
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    More about this item

    Keywords

    Disagreement; Trust;

    JEL classification:

    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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