Media Makes Momentum

60 Pages Posted: 12 Jun 2012

See all articles by Alexander Hillert

Alexander Hillert

Goethe University Frankfurt - Department of Finance

Heiko Jacobs

University of Duisburg-Essen, Campus Essen

Sebastian Müller

Technische Universität München (TUM) - TUM School of Management

Date Written: June 11, 2012

Abstract

Relying on more than 2.2 million articles from 45 national and local U.S. newspapers, we explore the link between (excess) press coverage and momentum profitability. From 1989 to 2010, firms particularly covered (neglected) by the media exhibit ceteris paribus significantly stronger (weaker) momentum. Put differently, return predictability is strongest for firms in the spotlight. This finding is robust and also withstands recent critique regarding the interaction of stock characteristics and momentum established in previous studies. Digging deeper, we find that the effect is stronger in US states with higher investor individualism and among stock predominantly held by overconfident fund managers. In line with prominent models, our results collectively support an overreaction-based explanation of the momentum effect.

Keywords: media, momentum, individualism, overconfidence, overreaction

JEL Classification: G12, G14

Suggested Citation

Hillert, Alexander and Jacobs, Heiko and Müller, Sebastian, Media Makes Momentum (June 11, 2012). Available at SSRN: https://ssrn.com/abstract=2081881 or http://dx.doi.org/10.2139/ssrn.2081881

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

Germany

Sebastian Müller

Technische Universität München (TUM) - TUM School of Management ( email )

Germany

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