The Impact of Financial Times Deutschland News on Stock Prices – Post Announcement Drifts and Inattention of Investors

Financial Markets and Portfolio Management (Forthcoming)

38 Pages Posted: 5 Jan 2013 Last revised: 14 Apr 2014

See all articles by Alexander Gabriel Kerl

Alexander Gabriel Kerl

University of Giessen - Department of Financial Services

Carolin Victoria Schürg

Deutsche Bundesbank - Statistics - Corporate Balance Sheet Statistics

Andreas Walter

University of Giessen - Department of Financial Services

Date Written: November 25, 2013

Abstract

Within this paper, we analyze the impact of Financial Times Deutschland (FTD) news on stock prices and trading volumes. Based on a sample of all news on German DAX, MDAX and SDAX companies published within the news section of the FTD between 2006 and 2010, our results show that articles that contain positive (negative) information are associated with significantly positive (negative) abnormal returns and abnormal trading volumes around their publication. Furthermore, our results show an initial underreaction to these articles and a subsequent post publication drift. Based on the inattention hypothesis, we show that high-attention news (proxied by abnormal trading volume) almost instantaneously influence stock prices to reach their new valuation levels, whereas the price adjustment process takes much longer following low-attention news. Our results also hold within multivariate regressions where we additionally control for stock-specific characteristics (e.g., institutional ownership, size and price-to-book ratio) as well as other attention grabbing events (as measured by ad-hoc announcements and cover page news articles). Finally, we show that results primarily hold in the non-crisis period.

Keywords: Underreaction, media coverage, news, abnormal trading volume, investor inattention

JEL Classification: G12, G14

Suggested Citation

Kerl, Alexander Gabriel and Schürg, Carolin Victoria and Walter, Andreas, The Impact of Financial Times Deutschland News on Stock Prices – Post Announcement Drifts and Inattention of Investors (November 25, 2013). Financial Markets and Portfolio Management (Forthcoming). Available at SSRN: https://ssrn.com/abstract=2195964 or http://dx.doi.org/10.2139/ssrn.2195964

Alexander Gabriel Kerl (Contact Author)

University of Giessen - Department of Financial Services ( email )

Licher Str, 74
Giessen, 35394
Germany

Carolin Victoria Schürg

Deutsche Bundesbank - Statistics - Corporate Balance Sheet Statistics ( email )

United States

Andreas Walter

University of Giessen - Department of Financial Services ( email )

Betriebswirtschaftslehre V
Giessen, 35394
Germany

HOME PAGE: http://wiwi.uni-giessen.de/ma/dat/walter/Andreas_Walter/

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