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Media sentiment and stock returns

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  • Bask, Mikael
  • Forsberg, Lars
  • Östling, Andreas

Abstract

Based on 35,344 news articles published in the Financial Times that cover 40 companies that have been included in the Dow Jones Industrial Average, we find that a negative media sentiment in the form of a negative language tone in news articles is a priced factor in five of nine asset-pricing models that aim to explain the cross-section of stock returns. In particular, the sentiment factor is a priced factor in the market model augmented with the sentiment factor in all three samples—the 2005–09 subsample, the 2010–18 subsample, and the 2005–18 full sample—and in the Fama-French three- and five-factor models augmented with the sentiment factor in the 2010–18 subsample. In addition, factor-spanning regressions with the Fama-French five-factor model as the right-hand-side model confirm that the sentiment factor contributes to the model’s explanation of the stocks’ mean excess returns in the 2005–09 subsample and the 2005–18 full sample.

Suggested Citation

  • Bask, Mikael & Forsberg, Lars & Östling, Andreas, 2024. "Media sentiment and stock returns," The Quarterly Review of Economics and Finance, Elsevier, vol. 94(C), pages 303-311.
    • Handle: RePEc:eee:quaeco:v:94:y:2024:i:c:p:303-311
    DOI: 10.1016/j.qref.2024.02.008
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