I believe investors react differently to good news than bad news. Investor reaction to good and bad news is asymmetric: bad economic news is likely to play a more significant role in shaping investors’ expectations than good economic news. 

A market overreacts to both favorable and unfavorable information signals (good and bad news) in the intermediate period and corrects itself over the long run. 

A research paper by Abdulaziz M. Alwathainani titled "Does Bad Economic News Play a Greater Role in Shaping Investors’ Expectations than Good Economic News?" (June 17, 2010) is an example of evidence of our belief. The bold highlights are my own.

ABSTRACT:

Using consistency in monthly returns as a proxy for good and bad economic news, I show that investors overreact to a series of favorable and unfavorable news. However, bad news plays a greater role in shaping investors’ expectations than good news. Consistent losers exhibit stronger price momentum in Year 1 followed by a more pronounced and persistent price reversal in Years 2 through 5 relative to their consistent winner counterparts. This evidence is robust to the three-factor Fama-French model and momentum factor. Results reported in this study provide general support to the psychology-based theories, but none of the existing models fully captures the weighting differential that negative and positive information signals play in shaping investors’ expectations.

Some interesting quotes from the paper:

investors’ responses to consistency in good and bad news are asymmetric. Bad economic news is likely to play a more significant role in shaping investors’ expectations than good economic news. Results reported in this study indicate that investors tend to believe that the losing streak of past losers is expected to continue moving in the same trajectory for a longer period than the winning streak of their consistent winner cohorts (Balsara ,Zheng, Vidozzi, and Vidozzi., 2006; Alwathainani, 2009).

According to the psychology-based theories (e.g., Daniel et al., 1998; Barberis et al., 1998), investors are likely to overreact to consistency of past performance drifting in the same direction for a sufficient period of time. This overreaction should manifest itself in intermediate price momentum followed by a long-term price reversal as investors realize that their prior expectations are not fully warranted. My findings provide general support to this prediction. However, none of these models captures the asymmetric in investors’ responses to a string of good and bad news reported in this paper. The theories of Daniel et al. (1998) and Barberis et al. (1998) assume implicitly or explicitly that investors’ reactions to good and bad news is symmetric.

This asymmetric reaction to firms’ past good and bad price performance should lead to a strong price drift over the short horizon and a long run price reversal for consistent losers compared to their consistent winner cohorts.

Source: Alwathainani, Abdulaziz M., Does Bad Economic News Play a Greater Role in Shaping Investors’ Expectations than Good Economic News? (June 17, 2010). Available at SSRN: http://ssrn.com/abstract=1626274 or doi:10.2139/ssrn.1626274