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Asset returns, news topics, and media effects

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  • Vegard Høghaug Larsen
  • Leif Anders Thorsrud

Abstract

We decompose the textual data in a daily Norwegian business newspaper into news topics, and we investigate their predictive and causal role for asset prices. Our findings suggest that news published through the mass media has significant, persistent, and potentially economically profitable predictive power for returns. Moreover, during an exogenous media strike, returns for firms particularly exposed to our news measure experience a substantial fall relative to the control group. Together, these findings lend support for a view where the mass media acts as an “information intermediary” between agents and the state of the world, and disseminates fundamental information to investors.

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  • Vegard Høghaug Larsen & Leif Anders Thorsrud, 2022. "Asset returns, news topics, and media effects," Scandinavian Journal of Economics, Wiley Blackwell, vol. 124(3), pages 838-868, July.
    • Handle: RePEc:bla:scandj:v:124:y:2022:i:3:p:838-868
    DOI: 10.1111/sjoe.12469
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    Cited by:

    1. Larsen, Vegard H. & Thorsrud, Leif Anders & Zhulanova, Julia, 2021. "News-driven inflation expectations and information rigidities," Journal of Monetary Economics, Elsevier, vol. 117(C), pages 507-520.
    2. Lino Wehrheim, 2019. "Economic history goes digital: topic modeling the Journal of Economic History," Cliometrica, Springer;Cliometric Society (Association Francaise de Cliométrie), vol. 13(1), pages 83-125, January.
    3. Daniel Borup & Jorge Wolfgang Hansen & Benjamin Dybro Liengaard & Erik Christian Montes Schütte, 2023. "Quantifying investor narratives and their role during COVID‐19," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 38(4), pages 512-532, June.
    4. Dorine Boumans & Henrik Müller & Stefan Sauer, 2022. "How Media Content Influences Economic Expectations: Evidence from a Global Expert Survey," ifo Working Paper Series 380, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    5. Saskia Ter Ellen & Vegard H. Larsen & Leif Anders Thorsrud, 2022. "Narrative Monetary Policy Surprises and the Media," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 54(5), pages 1525-1549, August.
    6. David Ardia & Keven Bluteau & Kris Boudt & Koen Inghelbrecht, 2020. "Climate change concerns and the performance of green versus brown stocks," Working Paper Research 395, National Bank of Belgium.
    7. Vegard H�ghaug Larsen & Leif Anders Thorsrud, 2018. "Business cycle narratives," Working Papers No 6/2018, Centre for Applied Macro- and Petroleum economics (CAMP), BI Norwegian Business School.
    8. Lino Wehrheim, 2017. "Economic History Goes Digital: Topic Modeling the Journal of Economic History," Working Papers 177, Bavarian Graduate Program in Economics (BGPE).
    9. Lin Chen & Stephanie Houle, 2023. "Turning Words into Numbers: Measuring News Media Coverage of Shortages," Discussion Papers 2023-8, Bank of Canada.
    10. Saadon, Yossi & Schreiber, Ben Z., 2023. "Newspapers tone and the overnight-intraday stock return anomaly," Journal of Financial Markets, Elsevier, vol. 65(C).
    11. Leif Anders Thorsrud, 2016. "Nowcasting using news topics Big Data versus big bank," Working Papers No 6/2016, Centre for Applied Macro- and Petroleum economics (CAMP), BI Norwegian Business School.
    12. Jon Ellingsen & Vegard H. Larsen & Leif Anders Thorsrud, 2022. "News media versus FRED‐MD for macroeconomic forecasting," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 37(1), pages 63-81, January.
    13. Jon Ellingsen & Vegard H. Larsen & Leif Anders Thorsrud, 2020. "News Media vs. FRED-MD for Macroeconomic Forecasting," CESifo Working Paper Series 8639, CESifo.
    14. Mosi Rosenboim & Yossi Saadon & Ben Z. Schreiber, 2018. "“Much Ado about Nothing”? The Effect of Print Media Tone on Stock Indices," Bank of Israel Working Papers 2018.10, Bank of Israel.

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    JEL classification:

    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling
    • C8 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs
    • G4 - Financial Economics - - Behavioral Finance
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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