Media Makes Momentum
Review of Financial Studies, Forthcoming
83 Pages Posted: 16 Mar 2012 Last revised: 1 Apr 2015
Date Written: July 7, 2014
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: Suggested Citation