Macroeconomic announcements lead to the repricing of previous firm-specific earnings news, generating cross-sectional heterogeneity in risk compensation. When firms announce earnings, investors form joint beliefs about firm-specific and aggregate conditions. Subsequent macroeconomic announcements reveal information about the aggregate state of the economy, prompting investors to reassess the firm-specific component of prior earnings news. We develop a dynamic general equilibrium model in which investors rationally learn from both earnings and macroeconomic announcements to quantify this repricing channel. Empirical evidence supports the model's predictions: on macroeconomic announcement days, firms with recent earnings news earn a lower risk premium relative to those without, and this effect is stronger for firms whose earnings announcements were more informative about aggregate conditions.

Subjective expectations and asset prices both revolve around distorted probabilities. Subjective expectations are expectations under biased probabilities, and asset prices are expectations under risk-neutral probabilities. Given this link, asset pricing techniques designed to estimate a Stochastic Discount Factor (SDF) can be used to estimate a Subjective Belief Factor (SBF), i.e., a distortion that characterizes many subjective expectations even for non-financial variables. Using the Survey of Professional Forecasters and Blue Chip, we find that differences between subjective expectations and statistical expectations for 24 macroeconomic variables can be summarized (average R-squared of 50%) by a single SBF related to real GDP growth and the T-bill rate. This SBF also accurately replicates differences across the 24 variables in the serial correlation of forecast errors and under/overreaction. Further, the SBF can be used to succinctly incorporate subjective beliefs data into asset pricing models, even those involving many expectations. Applying our measured SBF to a model of cross-sectional stock returns, we estimate that distorted beliefs account for the majority of excess returns for the Fama-French factors and explain about two thirds of the variation in returns across 176 anomalies, while the remaining third is attributed to preferences/risk. Our results support models like robust control and certain versions of diagnostic expectations in which agents’ beliefs across different variables are characterized by a single probability distortion.

I document a large increase in intraday market reactions to Consumer Price Index (CPI) news during the 2021-2023 inflation surge, while reactions to other macroeconomic news announcements remain comparatively unchanged. An investor attention measure - constructed from Bloomberg Terminal coverage in the days leading up to the CPI release - can robustly explain the rise in sensitivity to CPI news across asset prices. While the attention measure shares common variation with a variety of factors, none of the alternatives considered can eliminate its explanatory power. Based on this evidence, I construct a similar measure for Federal Open Market Committee (FOMC) announcements. Higher investor attention predicts greater market volatility following FOMC announcements, and further evidence indicates that this increase reflects an amplification of market sensitivity to FOMC news. Overall, the findings point to substantial time variation in markets' sensitivity to macroeconomic news, a larger role for endogenous attention in macro-finance, and potential challenges in measuring monetary policy through financial markets.