Media Makes Momentum

Review of Financial Studies, Forthcoming

83 Pages Posted: 16 Mar 2012 Last revised: 1 Apr 2015

See all articles by Alexander Hillert

Alexander Hillert

Goethe University Frankfurt - Department of Finance

Heiko Jacobs

University of Duisburg-Essen, Campus Essen

Sebastian Müller

German Graduate School of Management and Law

Date Written: July 7, 2014

Abstract

Relying on 2.2 million articles from 45 national and local U.S. newspapers between 1989 and 2010, we find that firms particularly covered by the media exhibit ceteris paribus significantly stronger momentum. The effect depends on article tone, reverses in the long-run, is more pronounced for stocks with high uncertainty, and stronger in states with high investor individualism. Our findings suggest that media coverage can exacerbate investor biases, leading return predictability to be strongest for firms in the spotlight of public attention. These results collectively lend credibility to an overreaction-based explanation for the momentum effect.

Keywords: Momentum, media, overreaction, attention effects, investor biases

JEL Classification: G12, G14

Suggested Citation

Hillert, Alexander and Jacobs, Heiko and Müller, Sebastian, Media Makes Momentum (July 7, 2014). Review of Financial Studies, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2023442 or http://dx.doi.org/10.2139/ssrn.2023442

Alexander Hillert (Contact Author)

Goethe University Frankfurt - Department of Finance ( email )

House of Finance
Grueneburgplatz 1
Frankfurt am Main, Hessen 60323
Germany

Heiko Jacobs

University of Duisburg-Essen, Campus Essen ( email )

Universitätsstr. 9
Essen, 45141
Germany
+49-(0)621-181-3453 (Phone)
+49-(0)621-181-1534 (Fax)

HOME PAGE: http://sites.google.com/site/heikojacobsfinance/

Sebastian Müller

German Graduate School of Management and Law ( email )

Bildungscampus 2
Heilbronn, 74076
Germany
+49-(0)7131645636861 (Phone)
+49-(0)713164563627 (Fax)

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