Media-expressed negative tone and firm-level stock returns

Khurshid Ahmad, Jing Guang Han, Elaine Hutson, Colm Kearney, Sha Liu

Research output: Contribution to journalArticleResearchpeer-review

25 Citations (Scopus)

Abstract

We build a corpus of over 51/2 million news articles on 20 large US firms over the 10-year period from January 2001 to December 2010, and use it to study the time-varying nature of the relation between media-expressed firm-specific tone and firm-level returns. By estimating a series of separate rolling window vector autoregressive (VAR) models for each firm, we show how media-expressed negative tone impacts firm-level returns episodically in ways that vary across firms and over time. We find that firms experience prolonged periods during which media-expressed tone has no effect on returns, and occasional episodes when it has a significant impact. During the significant episodes, its impacts are sometimes quickly reversed and at other times they endure - implying that media comment and analysis can sometimes be sentiment (or noise), but it can also contain value-relevant information or news. Our findings are in general consistent with efficiently functioning markets in which the media assists with the processing of complex information.

Original languageEnglish
Pages (from-to)152-172
Number of pages21
JournalJournal of Corporate Finance
Volume37
DOIs
Publication statusPublished - 1 Apr 2016

Keywords

  • Market efficiency
  • Media-expressed tone, negative sentiment
  • News
  • Textual analysis

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