Abstract: News shock models seek to generate positive co-movement between consumption, investment, total labor supply, and output in response to good news about the future state of the economy. Several such models exist, and all rely on the assumption of rational expectations (RE). In this paper the RE solution of the three-sector RBC model introduced in Beaudry and Portier (2004) is analyzed for stability properties related to relaxing the RE assumption. In particular I consider the weaker assumption that agents are endowed with a perceived law of motion (PLM) and behave as econometricians to update their beliefs about the particular coefficients governing the actual law of motion (ALM). If the RE equilibrium obtains under learning it is said to be expectationally stable (E-Stable). I find that regardless of specific assumptions regarding the timing of informational conditioning, the RE solution in this news shock model is E-Stable.