Media Content and Stock Returns: The Predictive Power of Press

Abstract

The full-text may be used and/or reproduced, and given to third parties in any format or medium, without prior permission or charge, for personal research or study, educational, or not-for-pro t purposes provided that:• a full bibliographic reference is made to the original source • a link is made to the metadata record in DRO • the full-text is not changed in any way The full-text must not be sold in any format or medium without the formal permission of the copyright holders.Please consult the full DRO policy for further details. Jie Michael Guo Durham Univercity Business School, UKThis paper examines whether tone (positive and negative) and volume of firm-specific news media content provide valuable information about future stock returns, using UK news media data from 1981-2010. The results indicate that both tone and volume of news media content significantly predict next period abnormal returns, with the impact of volume more pronounced than tone. Additionally, the predictive power of tone is found to be stronger among lower visibility firms. Further, the paper finds evidence of an attention-grabbing effect for firm-specific news stories with high media coverage, mainly seen among larger firms. A simple news-based trading strategy produces statistically significant risk-adjusted returns of 14.2 to 19 basis points in the period [2003][2004][2005][2006][2007][2008][2009][2010]. At the aggregate level, price pressure induced by semantics in news stories is corrected only in part by subsequent reversals. Overall, the findings suggest firm-specific news media content incorporates valuable information that predicts asset returns. (JEL: G1, G14, G17)

News Media and Investor Sentiment over the Long Run

“…In terms of any potential influence on the stock market, it is important to establish when the news in the FT was in the hands of investors and traders. In the case of the FT, the physical paper was published, printed and distributed prior to the opening of UK financial markets (Ferguson et al, 2015). The FT.com was launched in 1995, and some articles published in the print version of the newspaper were available online before market close of the preceding trading day.…”

The Impact of Textual Sentiment on Sovereign Bond Yield Spreads: Evidence from the Eurozone Crisis

“…Three text sources have been studied: corporate disclosures/filings, news stories and internet messages. The news stories category, which is most relevant to this paper, includes Tetlock (2007), Tetlock et al (2008), Engelberg (2008), Sinha (2010), Garcia (2013), Ahmad et al (2014), andFerguson et al (2014). Tetlock (2007) and Garcia (2013) study general economic and financial news on Wall Street Journal and New York Times, respectively.…”

“…Tetlock (2007) and Garcia (2013) study general economic and financial news on Wall Street Journal and New York Times, respectively. Ferguson et al (2014) study firm-specific UK news media articles from The Financial Times, The Times, The Guardian and Mirror, and so on. Tetlock et al (2008), Engelberg (2008), Sinha (2010) and Ahmad et al (2014) employ much wider news sources, and they all research into firm-specific news.…”

News media analytics in finance: a survey

“…These aspects allow researchers to study the impacts of news content aggregated over varying scales of time and entity. For example, researchers have studied the influence of news at the firm level (Tetlock et al ., ; Ferguson et al ., ), industry level (Li et al ., ; Smales, ), market level (Tetlock, ; Wei et al ., ), commodity level (Clements and Todorova, ; Maslyuk‐Escobedo et al ., ), between currencies (Nassirtoussi et al ., ), across countries (Griffin et al ., ) and at the global market level (Uhl et al ., ). Time horizons vary from intraday (Groß‐Klußmann and Hautsch, ; Ho et al ., ), daily (Tetlock, ; Garcia, ), weekly (Lu and Wei, ; Sinha, ), monthly (Ammann et al ., ; Cahan et al ., ) and over several years (Hillert et al ., ; Kraussl and Mirgorodskaya, ).…”