What the Market Watched: Bloomberg News Stories and Bank Returns as the Financial Crisis Unfolded

62 Pages Posted: 2 Oct 2009 Last revised: 23 Sep 2010

See all articles by Robin L. Lumsdaine

Robin L. Lumsdaine

American University - Department of Finance and Real Estate; National Bureau of Economic Research (NBER)

Date Written: September 21, 2010


This paper explores a unique dataset on the largest, most systemically important US banks, gathered via Bloomberg during the early stages of the recent financial crisis. Unlike previous literature that has often used information on headlines as a metric for news, the dataset here contains information on readership interest and therefore provides a glimpse into the extent to which financial market participants were focused on the news of a particular bank as the financial crisis unfolded. By examining the news that captured the attention of these participants and exploring its relationship to equity returns, this paper considers the role that market news and reputation may have had in shaping perception about banks during the crisis. There is strong evidence that those banks that on average had relatively high readership interest, or that ranked highly in readership interest a large proportion of the days in the sample, suffered significantly lower returns than those that did not, both contemporaneously and subsequently; in addition, greater news readership was associated with higher volatility of returns. A model portfolio that each day is short the ten banks’ stocks that were in the top readership rankings the previous day and long the other banks’ stocks generates a cumulative P&L of 60.8% in the run-up to the crisis. The results suggest that news stories that result in high readership among financial market participants can have a large effect in shaping the latter’s perceptions and subsequent decisions.

Keywords: Financial crisis, banks, news, stock returns, Federal Reserve

JEL Classification: G01, G14, G21

Suggested Citation

Lumsdaine, Robin L., What the Market Watched: Bloomberg News Stories and Bank Returns as the Financial Crisis Unfolded (September 21, 2010). Available at SSRN: https://ssrn.com/abstract=1482019 or http://dx.doi.org/10.2139/ssrn.1482019

Robin L. Lumsdaine (Contact Author)

American University - Department of Finance and Real Estate ( email )

Kogod School of Business
4400 Massachusetts Ave., N.W.
Washington, DC 20016-8044
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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