Media Content, Infectious Transmission, and REIT Returns
Posted: 4 Aug 2012
Date Written: August 3, 2012
This paper investigates the relationship between financial news content (optimistic/pessimistic), REIT returns, and trading volume. We apply textual analysis and find that high media pessimism predicts downward pressure on REIT returns. Negative words in the financial press are significantly negatively related to REIT returns. We also show that high media optimism predicts higher REIT trading volume. In addition, we find a significant unidirectional Granger causality from both optimism and pessimism to REIT returns and volume. Results using Johansen cointegration suggest that there is a long run relationship between media content and both REIT return and volume. Using EGARCH and TGARCH, we document significant asymmetry (leverage effects) in REIT returns. Interestingly, this indicates that negative shocks (bad news) have a greater impact than positive shocks (good news).
Keywords: Asymmetrical information, Real estate investment trusts, Textual analysis, Media pessimism
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