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Are Investors Guided by the News Disclosed by Companies or by Journalists?

Author

Listed:
  • Zilu Shang

    (ICMA Centre, Henley Business School, University of Reading)

  • Chris Brooks

    (ICMA Centre, Henley Business School, University of Reading)

  • Rachel McCloy

    (University of Reading)

Abstract

Most previous studies demonstrating the influential role of the textual information released by the media on stock market performance have concentrated on earnings-related disclosures. By contrast, this paper focuses on disposal announcements, so that the impacts of listed companies' announcements and journalists' stories can be compared concerning the same events. Consistent with previous findings, negative words, rather than those expressing other types of sentiment, statistically significantly affect adjusted returns and detrended trading volumes. However, extending previous studies, the results of this paper indicate that shareholders' decisions are mainly guided by the negative sentiment in listed companies' announcements rather than that in journalists' stories. Furthermore, this effect is restricted to the announcement day. The average market reaction - measured by adjusted returns - is inversely related only when the announcements are ignored by the media, but the dispersion of market reaction - measured by detrended trading volume - is positively affected only when announcements are followed up by journalists.

Suggested Citation

  • Zilu Shang & Chris Brooks & Rachel McCloy, 2013. "Are Investors Guided by the News Disclosed by Companies or by Journalists?," ICMA Centre Discussion Papers in Finance icma-dp2013-04, Henley Business School, University of Reading.
    • Handle: RePEc:rdg:icmadp:icma-dp2013-04
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    Keywords

    information sentiment; regulatory announcement; mass media stories; media coverage; disposal;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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