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Does media coverage matter for the performance of technical trading strategies? Evidence from Taiwan

Author

Listed:
  • Yao-Tsung Wu

    (National Kaohsiung University of Science and Technology)

  • Chien-Hung Liu

    (National Kaohsiung University of Science and Technology)

  • Kuo-Hao Lin

    (National Taitung Junior College)

  • Dun-Yao Ke

    (National Sun Yat-sen University)

Abstract

Motivated by the idea that “coverage by mass media can play a role in alleviating information problems even if it does not break genuine news” (Fang and Peress, 2009: 2050), this study is first to relate media coverage to performing moving average (MA) technical trading in the cross-section. Testing a sample of Taiwanese listed stocks over the period 1996 to 2021, we find that the MA strategy’s profitability is high (low) for portfolios grouped by stocks with low (high) media coverage. For the “low-media-coverage” portfolio, the MA strategy earns about 24.75% per annum, adjusting for the Fama–French five risk factors. The MA’s superior performance on the “low-media-coverage” portfolio remains after controlling for market liquidity and market sentiment. We also find that the low media effect on the MA strategy’s profitability is more pronounced during recessionary periods. Our overall results are supported by the hypothesis that a low level of media coverage induces investor inattention and slows information diffusion, which amplifies the investors’ under reaction bias and stronger price continuation, being associated with a higher MA strategy’s profitability.

Suggested Citation

  • Yao-Tsung Wu & Chien-Hung Liu & Kuo-Hao Lin & Dun-Yao Ke, 2024. "Does media coverage matter for the performance of technical trading strategies? Evidence from Taiwan," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 23(1), pages 147-166, January.
    • Handle: RePEc:spr:portec:v:23:y:2024:i:1:d:10.1007_s10258-022-00231-0
    DOI: 10.1007/s10258-022-00231-0
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    More about this item

    Keywords

    Media Coverage; Moving average; Investor attention; Price continuation;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • L82 - Industrial Organization - - Industry Studies: Services - - - Entertainment; Media

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