Abstract

https://ssrn.com/abstract=1462416
 
 

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Citations (40)



 


 



The Causal Impact of Media in Financial Markets


Joseph Engelberg


University of California, San Diego (UCSD) - Rady School of Management

Christopher A. Parsons


University of California, San Diego (UCSD) - Rady School of Management

October 28, 2009


Abstract:     
It is challenging to disentangle the causal impact of media reporting from the impact of the events being reported. We solve this problem by comparing the behaviors of investors with access to different media coverage of the same information event. We use zip codes to identify 19 mutually exclusive trading regions, corresponding to 19 large U.S. cities and local newspapers (e.g., the Houston Chronicle). For all earnings announcements of S&P 500 Index firms, we find that local media coverage strongly predicts local trading, after controlling for characteristics of the earnings surprise, firm, local investors, and reporting newspaper(s). Moreover, the local trading-local coverage effect: 1) depends precisely on the specific timing of local reporting (e.g., one day after the earnings announcement, two days afterward, etc.) and 2) disappears entirely during extreme weather events, which leaves media content unchanged, but disrupts transmission to investors.

Number of Pages in PDF File: 44

Keywords: public news, media coverage, media effect

JEL Classification: G14, G12


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Date posted: August 27, 2009 ; Last revised: March 15, 2010

Suggested Citation

Engelberg, Joseph and Parsons, Christopher A., The Causal Impact of Media in Financial Markets (October 28, 2009). Available at SSRN: https://ssrn.com/abstract=1462416 or http://dx.doi.org/10.2139/ssrn.1462416

Contact Information

Joseph Engelberg (Contact Author)
University of California, San Diego (UCSD) - Rady School of Management ( email )
9500 Gilman Drive
Rady School of Management
La Jolla, CA 92093
United States
Christopher A. Parsons
University of California, San Diego (UCSD) - Rady School of Management ( email )
9500 Gilman Drive
Mail Code 0502
La Jolla, CA 92093-0112
United States
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