The Perils of Crying ‘Fake News’

55 Pages Posted: 6 Dec 2016 Last revised: 14 Dec 2018

See all articles by Mancy Luo

Mancy Luo

Erasmus University - Rotterdam School of Management

Alberto Manconi

Bocconi University - Department of Finance; Centre for Economic Policy Research (CEPR)

Massimo Massa

INSEAD - Finance

Date Written: December 13, 2018


We use the 2007 acquisition of Dow Jones Newswires (DJNW) by News Corporation as an experiment, to study whether the perception of a news source’s political affiliation affects its credibility and impact on the financial market. Following the acquisition, the prices of “Republican” stocks (stocks of firms making larger political contributions to the Republican party) become less sensitive to sentiment in DJNW news pieces, relative to “Democrat” stocks. The effect is driven by the reaction to positive commentary about Republican stocks and negative about Democrat stocks, and by investors with a Democrat lean. We find, however, no evidence of an actual bias in DJNW sentiment following 2007, suggesting that the market fails to incorporate valuable information in stock prices. Consistent with this view, a trading strategy that tracks DJNW news earns abnormal returns over the period following the acquisition. Finally, we find that the attenuated response to DJNW news has material implications for asset price efficiency, and associates with a lower firm-specific information content of stock prices. These findings suggest that crying ‘fake news’ and more in general allegations of a bias in the media can be as relevant as biased news themselves.

Keywords: Media and financial markets; fake news; political bias

JEL Classification: G00, G14

Suggested Citation

Luo, Mancy and Manconi, Alberto and Massa, Massimo, The Perils of Crying ‘Fake News’ (December 13, 2018). Available at SSRN: or

Mancy Luo (Contact Author)

Erasmus University - Rotterdam School of Management ( email )

Burgemeester Oudlaan 50,
Mandeville Building, Room T08-47,
Rotterdam, 3062PA


Alberto Manconi

Bocconi University - Department of Finance ( email )

Via Roentgen 1
Milano, MI 20136


Centre for Economic Policy Research (CEPR) ( email )

United Kingdom

Massimo Massa

INSEAD - Finance ( email )

Boulevard de Constance
F-77305 Fontainebleau Cedex
+33 1 6072 4481 (Phone)
+33 1 6072 4045 (Fax)

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