jats:titleAbstract</jats:title>jats:pThis paper proposes an original behavioural finance representative agent model, to explain how fake news’ empirical price impacts can persist in finance despite contradicting the efficient-market hypothesis. The model reconciles empirically-observed price overreactions to fake news with empirically-observed price underreactions to real news, and predicts a novel secondary impact of fake news: that fake news in a security amplifies underreactions to subsequent real news for the security. Evaluating the model against a large-sample event study of the 2019 Chinese ADR Delisting Threat fake news and debunking event, this paper finds strong qualitative validation for its model’s dynamics and predictions.</jats:p>