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The role of media in financial decision-making

In: Handbook of Financial Decision Making

Author

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  • Kenneth R. Ahern
  • Joel Peress

Abstract

The financial media plays a critical role in financial markets as an information intermediary between information sources and information users. This chapter reviews the literature on the role of the media for financial decision-making, using a broad definition of media based on three key functions: 1) facilitating access to information, 2) filtering information, and 3) creating new information. Though these functions span a diverse set of organizations including search platforms, social media, and traditional print media, a common theme emerges from the literature: the media improves financial decision-making, on average. Markets are more efficient, investors earn higher returns, and firms have lower costs. We also discuss the negative effects of media, including herding and overreaction, as well as suggest future avenues of research.

Suggested Citation

  • Kenneth R. Ahern & Joel Peress, 2023. "The role of media in financial decision-making," Chapters, in: Gilles Hilary & David McLean (ed.), Handbook of Financial Decision Making, chapter 9, pages 192-212, Edward Elgar Publishing.
    • Handle: RePEc:elg:eechap:21126_9
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    File URL: https://www.elgaronline.com/doi/10.4337/9781802204179.00019
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