Which news is incorporated slowly?

The news flow (or rather, deluge) is relentless, and nobody can stay ahead of all the news published on markets and companies anymore. Hence, we all have to be selective about what we pay attention to, which means that some news will only be incorporated into stock prices slowly. A new study gave us some clues about where news shocks come from that are only slowly reflected in share prices.

This study found that for every company, the news flow is predictable. That reflects that narratives drive share prices and markets overall. Narratives that dominate the headlines take the spotlight, and investors overreact to these stories. In contrast, narratives that don’t fit the narrative tend to be overlooked and incorporated into share prices only slowly. This effect is particularly strong in smaller, less liquid stocks, as you can imagine.

The new study looked at US stocks between 1996 and 2022 and used LLMs to analyse the news flow across multiple dimensions and how the share price reacted to it. Based on this analysis, the researchers then predicted the news flow for the coming month as a function of past news flow. Deviations from this predicted news flow are a news surprise.

Interestingly, these news surprises seem to get incorporated only very slowly into the share price because they have to overturn or at least modify the prevailing narrative. And this can take up to 18 months, according to this study. The chart below shows that the value-added from paying attention to news surprises that contradict the prevailing narrative is particularly high for smaller companies, but it remains substantial for large caps as well.

Performance of portfolios based on news shocks

Source: Didisheim et al. (2026)

Most of us won’t be able to run LLMs on a huge universe of stocks all the time and predict future news flows to identify unexpected news shocks. But what every investor can do is to focus on two things. First, understand the narrative that is driving a company’s share price or the market overall. In 2026, the dominant market narratives are the potential fallout from the Iran war and the AI boom.

Then look for news items that may change the narrative in the future because they are important for the market or a company, but contradict the current narrative or are at least unrelated to it. These news items will likely take longer to be incorporated into prices.

The chart below shows that these news surprises are increasingly coming from three areas: (i) corporate actions, deals, financings and restructurings, (ii) news about a company getting distressed or delisting (credit analysis can help here identify financial stress early), and (iii) changes to corporate guidance and outlook. Together, these three areas generate about 70% of news surprises that fly under the radar.

Which news gets incorporated slowly?

Source: Didisheim et al. (2026)