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Media Sentiment and UK Stock Returns

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Author Info

  • Nicky J. Ferguson

    ()
    (Durham Business School)

  • Jie Michael Guo

    ()
    (Durham Business School)

  • Nicky Herbert Y.T. Lam

    ()
    (Renmin University of China)

  • Dennis Philip

    ()
    (Durham Business School)

Registered author(s):

    Abstract

    This paper is the first to determine the effect that media sentiment has on stock returns for UK companies and tests whether there is any return predictability contained in the UK media sentiment data. We show that measures of positive and negative media sentiment have significant relationships with stock returns on the day news articles are published and that there is return predictability inherent in negative media sentiment the day following publication of media articles. We construct a news- based trading strategy to demonstrate the application of these results that earns significant positive abnormal returns.

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    File URL: http://dro.dur.ac.uk/10346
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    Bibliographic Info

    Paper provided by Durham University Business School in its series Working Papers with number 2011_06.

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    Date of creation: 01 Jan 2011
    Date of revision:
    Handle: RePEc:dur:durham:2011_06

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    Postal: Durham University Business School, Mill Hill Lane, Durham DH1 3LB, England
    Phone: +44 (0)191 334 5200
    Fax: +44 (0)191 334 5201
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    Web page: http://www.dur.ac.uk/business
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    Related research

    Keywords: media sentiment; stock returns; textual analysis; news-based trading strategy;

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    References

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    1. De Long, J Bradford & Andrei Shleifer & Lawrence H. Summers & Robert J. Waldmann, 1990. "Noise Trader Risk in Financial Markets," Journal of Political Economy, University of Chicago Press, vol. 98(4), pages 703-38, August.
    2. Alexander Dyck & Natalya Volchkova & Luigi Zingales, 2006. "The Corporate Governance Role of the Media: Evidence from Russia," NBER Working Papers 12525, National Bureau of Economic Research, Inc.
    3. Andrea Frazzini, 2006. "The Disposition Effect and Underreaction to News," Journal of Finance, American Finance Association, vol. 61(4), pages 2017-2046, 08.
    4. Lily Fang & Joel Peress, 2009. "Media Coverage and the Cross-section of Stock Returns," Journal of Finance, American Finance Association, vol. 64(5), pages 2023-2052, October.
    5. Elizabeth Demers & Clara Vega, 2008. "Soft information in earnings announcements: news or noise?," International Finance Discussion Papers 951, Board of Governors of the Federal Reserve System (U.S.).
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