Mass Media Effects on Trading Activities: Television Broadcasting Evidence from Japan
TL;DR: In this article, the authors examine how information broadcasting through television (TV) media influences stock market activities and find that increased information flow via TV is significantly associated with greater trading volume and larger price change.
Abstract: This study examines how information broadcasting through television (TV) media influences stock market activities. Consistent with the effect of TV information to attract investor attention, we find that increased information flow via TV is significantly associated with greater trading volume and larger price change. Market liquidity (bid–ask spread) is improved for more TV information flows, suggesting that new information arrival in the market widens information asymmetry. As for information type, hard information from business-oriented programs and earnings-related news contributes to the attention effect of media compared with soft information. Finally, the impact of TV is more influential for stocks with more individual shareholders than those with institutional shareholders.
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01 Jan 2013TL;DR: In this paper, the authors examine the impact of using Twitter to send market participants links to press releases that are provided via traditional disclosure methods and find that dissemination is positively associated with liquidity.
Abstract: Firm disclosures often reach only a portion of investors, which results in information asymmetry among investors, and therefore lower market liquidity. This issue is particularly salient for firms that are not highly visible, as they tend not to receive broad news dissemination via traditional intermediaries, such as the press. This paper examines whether firms can reduce information asymmetry by more broadly disseminating their news. To isolate the impact of dissemination, we focus our analysis on firms' use of Twitter and exploit the 140-character message restriction. Specifically, using a sample of technology firms, we examine the impact of using Twitter to send market participants links to press releases that are provided via traditional disclosure methods. We find this additional dissemination of firm-initiated news via Twitter is associated with lower abnormal bid-ask spreads and greater abnormal depths, consistent with a reduction in information asymmetry. Moreover, this result holds mainly for firms that are not highly visible, consistent with them being in greater need of this additional dissemination channel. We also examine the impact of dissemination on a volume-based measure of liquidity, and find that dissemination is positively associated with liquidity.
344 citations
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TL;DR: In this paper, the authors investigate the causal impact of national newspaper strikes on trading and price formation by examining national newspaper strike in several countries and demonstrate that the media contribute to the efficiency of the stock market by improving the dissemination of information among investors and its incorporation into stock prices.
Abstract: The media are increasingly recognized as key players in financial markets. I investigate their causal impact on trading and price formation by examining national newspaper strikes in several countries. Trading volume falls 12% on strike days. The dispersion of stock returns and their intraday volatility are reduced by 7%, while aggregate returns are unaffected. Moreover, an analysis of return predictability indicates that newspapers propagate news from the previous day. These findings demonstrate that the media contribute to the efficiency of the stock market by improving the dissemination of information among investors and its incorporation into stock prices.
153 citations
TL;DR: Li et al. as mentioned in this paper investigated the cross-sectional relation between media coverage and stock returns and found that no-media coverage stocks earn 55 basis points a month higher than stocks that are featured in the media.
Abstract: Using hand‐collected news headlines for a large sample of listed firms in China over a period of 2000–2015, we investigate the cross‐sectional relation between media coverage and stock returns. Our results document that no‐media coverage stocks earn 55 basis points a month higher than stocks that are featured in the media. This result is robust after controlling for common risk factors and is not driven by short‐run return reversals. Further analysis provides evidence to support the investor recognition hypothesis, suggesting that mass media may play an incremental role in providing a supplement to traditional channels of information dissemination. Therefore, results in this paper are of interests to both investors and regulators on drivers of stock returns.
11 citations
Cites background or result from "Mass Media Effects on Trading Activ..."
...Aman et al. (2016) find that television media in Japan is associated with higher trading volume and greater price change....
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...Aman et al. (2016) find that television media in Japan is associated with higher trading volume and greater price change. Griffin et al. (2011) examine the information effect of media for 56 countries around the world and find that the effect of public news on a firm’s stock price on news days is significant for developed markets. They do not find significant news effects for emerging markets, which is mainly explained by the existence of insider trading in these markets. Second, the news data for this study is hand collected from a media outlet that is quite popular to all types of investors, big or small, individual or institutional. These media headlines are in local language, meaning that local investors, who are dominant in Chinese stock markets, are able to read and assess the news about the firms. This media sample is unique and in contrast to other studies that their media sample is in English. Our sample of 1500 firms is much larger than the 235 Chinese firms included in Griffin et al. (2011) and covers a longer time period (2000–2015 versus 2003–2009). In addition, this study examines the effect of media coverage on stock return premium, which is different from examining the relevance of news by Griffin et al. (2011). Third, the examination of media and stock returns in China is of interests to both investors and regulators....
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...Aman et al. (2016) find that television media in Japan is associated with higher trading volume and greater price change. Griffin et al. (2011) examine the information effect of media for 56 countries around the world and find that the effect of public news on a firm’s stock price on news days is significant for developed markets. They do not find significant news effects for emerging markets, which is mainly explained by the existence of insider trading in these markets. Second, the news data for this study is hand collected from a media outlet that is quite popular to all types of investors, big or small, individual or institutional. These media headlines are in local language, meaning that local investors, who are dominant in Chinese stock markets, are able to read and assess the news about the firms. This media sample is unique and in contrast to other studies that their media sample is in English. Our sample of 1500 firms is much larger than the 235 Chinese firms included in Griffin et al. (2011) and covers a longer time period (2000–2015 versus 2003–2009)....
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...Aman et al. (2016) find that television media in Japan is associated with higher trading volume and greater price change. Griffin et al. (2011) examine the information effect of media for 56 countries around the world and find that the effect of public news on a firm’s stock price on news days is significant for developed markets....
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TL;DR: In this article, the authors apply a vector autoregression on a unique set of TV news, consumer sentiment and excess flows of mutual funds to find evidence that daily TV news is reflected in consumer sentiment.
Abstract: The central role of the media for people’s minds and for capital markets has been analyzed by a broad range of literature, nourished from several strands of academic research. Applying a vector autoregression on a unique set of TV news, consumer sentiment and excess flows of mutual funds, I find evidence that daily TV news is reflected in consumer sentiment and that this reflection varies with the news topics. However, I uncover no evidence of an effect on viewers’ allocation decisions. Mutual fund investors seem to put their money neither where their newly won insights from TV news are, nor where their sentiment is. The findings are robust to different measures of the fund flows and an alternative indicator for the news sentiment. The results indicate a direction for further studies on a more micro level.
3 citations
TL;DR: The authors applied a vector autoregression method to a unique set of TV news, consumer sentiment and excess flows of mutual funds and found evidence that daily TV news is reflected in consumer sentiment, and this reflection varies according to specific news topics.
Abstract: The central role of the media for people’s sentiment and for capital markets has been analysed by a broad range of literature, referenced from several strands of academic research. Applying a vector autoregression method to a unique set of TV news, consumer sentiment and excess flows of mutual funds, I have found evidence that daily TV news is reflected in consumer sentiment and that this reflection varies according to specific news topics. However, I have not found any evidence that this has an impact on viewers’ portfolio allocation decisions. Mutual fund investors neither seem to put their money where their newly gained insights from the TV news are, nor where their sentiment is. Anchoring also appears to play a role, at least for US investors. These findings are robust in relation to different measures of fund flows and as an alternative indicator for sentiment in the news media.
References
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TL;DR: The presence of traders with superior information leads to a positive bid-ask spread even when the specialist is risk-neutral and makes zero expected profits as discussed by the authors, and the expectation of the average spread squared times volume is bounded by a number that is independent of insider activity.
Abstract: The presence of traders with superior information leads to a positive bid-ask spread even when the specialist is risk-neutral and makes zero expected profits The resulting transaction prices convey information, and the expectation of the average spread squared times volume is bounded by a number that is independent of insider activity The serial correlation of transaction price differences is a function of the proportion of the spread due to adverse selection A bid-ask spread implies a divergence between observed returns and realizable returns Observed returns are approximately realizable returns plus what the uninformed anticipate losing to the insiders
5,902 citations
TL;DR: In this paper, the authors evaluate alternative methods for classifying individual trades as market buy or market sell orders using intraday trade and quote data and identify two serious potential problems with this method, namely, that quotes are often recorded ahead of the trade that triggered them and that trades inside the spread are not readily classifiable.
Abstract: This paper evaluates alternative methods for classifying individual trades as market buy or market sell orders using intraday trade and quote data. We document two potential problems with quote-based methods of trade classification: quotes may be recorded ahead of trades that triggered them, and trades inside the spread are not readily classifiable. These problems are analyzed in the context of the interaction between exchange floor agents. We then propose and test relatively simple procedures for improving trade classifications. THE INCREASING AVAILABILITY OF intraday trade and quote data is opening new frontiers for financial market research. The improved ability to discern whether a trade was a buy order or a sell order is of particular importance. In Hasbrouck (1988), the classification of trades as buys or sells is used to test asymmetric-information and inventory-control theories of specialist behavior. In Blume, MacKinlay, and Terker (1989), a buy-sell classification is used to measure order imbalance in tests of breakdowns in the linkage between S&P stocks and non-S&P stocks during the crash of October, 1987. In Harris (1989), an increase in the ratio of buys to sells is used to explain the anomalous behavior of closing prices. In Lee (1990), the imbalance in buy-sell orders is used to measure the market response to an information event. In Holthausen, Leftwich, and Mayers (1987), a buy-sell classification is used to examine the differential effect of buyer-initiated and seller-initiated block trades. Most past studies have classified trades as buys or sells by comparing the trade price to the quote prices in effect at the time of the trade. In this paper, we identify two serious potential problems with this method, namely, that quotes are often recorded ahead of the trade that triggered them, and that
3,301 citations
TL;DR: In this paper, the authors test and confirm the hypothesis that individual investors are net buyers of attentiongrabbing stocks, e.g., stocks in the news, stocks experiencing high abnormal trading volume, and stocks with extreme one day returns.
Abstract: We test and confirm the hypothesis that individual investors are net buyers of attention-grabbing stocks, e.g., stocks in the news, stocks experiencing high abnormal trading volume, and stocks with extreme one day returns. Attention-driven buying results from the difficulty that investors have searching the thousands of stocks they can potentially buy. Individual investors don't face the same search problem when selling because they tend to sell only stocks they already own. We hypothesize that many investors only consider purchasing stocks that have first caught their attention. Thus, preferences determine choices after attention has determined the choice set.
3,048 citations
TL;DR: The authors quantitatively measure the nature of the media's interactions with the stock market using daily content from a popular Wall Street Journal column and find that high media pessimism predicts downward pressure on market prices followed by a reversion to fundamentals.
Abstract: I quantitatively measure the nature of the media's interactions with the stock market using daily content from a popular Wall Street Journal column. I find that high media pessimism predicts downward pressure on market prices followed by a reversion to fundamentals, and unusually high or low pessimism predicts high market trading volume. These results and others are consistent with theoretical models of noise and liquidity traders. However, the evidence is inconsistent with theories of media content as a proxy for new information about fundamental asset values, as a proxy for market volatility, or as a sideshow with no relationship to asset markets.
2,115 citations
TL;DR: In this paper, the authors suggest that earnings announcements provide information that allows certain traders to make judgements about a firm's performance that are superior to the judgements of other traders, and that there may be more information asymmetry at the time of an announcement than in nonannouncement periods.
Abstract: This paper suggests that earnings announcements provide information that allows certain traders to make judgements about a firm's performance that are superior to the judgements of other traders. As a result, there may be more information asymmetry at the time of an announcement than in nonannouncement periods. More information asymmetry implies that bid–ask spreads increase, suggesting that market liquidity decreases at the time of an earnings announcement. Furthermore, informed opinions resulting from public disclosure may lead to an increase in trading volume, despite the reduction in liquidity that accompanies announcements.
1,790 citations