The New York Times and Wall Street Journal: Does Their Coverage of Earnings Announcements Cause 'Stale' News to Become 'New' News?

Journal of Behavioral Finance Volume II, Issue 2, 2014

37 Pages Posted: 14 Jul 2014 Last revised: 18 Jul 2014

See all articles by Matt Pinnuck

Matt Pinnuck

University of Melbourne - Department of Accounting and Business Information Systems

Date Written: June 12, 2014

Abstract

Recent research suggests that the stock market reacts to stale information if it is reported in the media because it is gives the impression of being “new” news. The objective of this study is to provide a unique test of this hypothesis using the time-series properties of quarterly earnings. It is well documented that seasonally-differenced quarterly earnings for adjacent quarters are positively correlated. Therefore a component of current quarter earnings when reported is news that was known or predictable at the end of the prior quarter and thus is old news. We find for those firms that receive media coverage in the Wall Street Journal and the New York Times that the price reaction at the time of the announcement of current earnings to past quarter’s seasonally-differenced quarterly earnings is greater than those firms that do not receive media coverage. The result is consistent with stale earnings information being given the appearance of new information resulting in a further price reaction. This suggests that the stale information hypothesis and media coverage could be a partial explanation for post-earnings announcement drift.

Keywords: media, earnings, market-efficiency, behavioral finance, post-earnings announcement drift.

JEL Classification: G14, M41

Suggested Citation

Pinnuck, Matthew, The New York Times and Wall Street Journal: Does Their Coverage of Earnings Announcements Cause 'Stale' News to Become 'New' News? (June 12, 2014). Journal of Behavioral Finance Volume II, Issue 2, 2014, Available at SSRN: https://ssrn.com/abstract=2465445 or http://dx.doi.org/10.2139/ssrn.2465445

Matthew Pinnuck (Contact Author)

University of Melbourne - Department of Accounting and Business Information Systems ( email )

Victoria
Melbourne, Victoria 3010 3010
Australia

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