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The New York Times and Wall Street Journal: Does Their Coverage of Earnings Announcements Cause “Stale” News to Become “New” News?

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  • Matthew Pinnuck

Abstract

Recent research suggests that the stock market reacts to stale information if it is reported in the media because it is gives the impression of being “new” news. The objective of this study is to provide a unique test of this hypothesis using the time-series properties of quarterly earnings. It is well documented that seasonally differenced quarterly earnings for adjacent quarters are positively correlated. Therefore a component of current quarter earnings when reported is news that was known or predictable at the end of the prior quarter and thus is old news. We find for those firms that receive media coverage in the Wall Street Journal and The New York Times that the price reaction at the time of the announcement of current earnings to past quarter's seasonally differenced quarterly earnings is greater than those firms that do not receive media coverage. The result is consistent with stale earnings information being given the appearance of new information resulting in a further price reaction. This suggests that the stale information hypothesis and media coverage could be a partial explanation for post-earnings announcement drift.

Suggested Citation

  • Matthew Pinnuck, 2014. "The New York Times and Wall Street Journal: Does Their Coverage of Earnings Announcements Cause “Stale” News to Become “New” News?," Journal of Behavioral Finance, Taylor & Francis Journals, vol. 15(2), pages 120-132, April.
    • Handle: RePEc:taf:hbhfxx:v:15:y:2014:i:2:p:120-132
    DOI: 10.1080/15427560.2014.908881
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    Cited by:

    1. Thang, Doan Ngoc & Anh, Pham Thi Hoang & Long, Trinh & Dong, Do Phy & Dat, Luong Van, 2022. "Monetary Stance and Favorableness of Monetary Policy in the Media: The Case of Viet Nam," ADBI Working Papers 1325, Asian Development Bank Institute.
    2. Pok, Wei Fong & Humayun Kabir, M. & Young, Martin, 2022. "Investor sentiment and mean-variance relation: Evidence from emerging futures markets," Finance Research Letters, Elsevier, vol. 46(PB).

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