The Stock Market’s Response to the Political Affiliation of News Sources

83 Pages Posted: 6 Dec 2016 Last revised: 7 Oct 2022

See all articles by Mancy Luo

Mancy Luo

Erasmus University

Alberto Manconi

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

Massimo Massa

INSEAD - Finance

Date Written: October 6, 2022

Abstract

We use the acquisition of Dow Jones & Co. by News Corporation in 2007 to study whether investors respond to a news source’s political affiliation. Following the acquisition, the price of Republican- (Democrat-) aligned stocks becomes less sensitive to favorable (unfavorable) Dow Jones Newswires (DJNW) sentiment, consistent with the market attaching less credibility to a politically affiliated source. There is, however, no evidence of change in DJNW sentiment, coverage, or language about Republican/Democrat stocks, suggesting a loss of price informativeness. Consistent with this view, a portfolio exploiting the attenuated reaction to DJNW news earns abnormal returns following 2007.

Keywords: Politics and financial markets; news analytics

JEL Classification: G00, G14

Suggested Citation

Luo, Mancy and Manconi, Alberto and Massa, Massimo, The Stock Market’s Response to the Political Affiliation of News Sources (October 6, 2022). Available at SSRN: https://ssrn.com/abstract=2879939 or http://dx.doi.org/10.2139/ssrn.2879939

Mancy Luo (Contact Author)

Erasmus University ( email )

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

HOME PAGE: http://sites.google.com/site/mancyluofinance/

Alberto Manconi

Bocconi University - Department of Finance ( email )

Via Roentgen 1
Milano, MI 20136
Italy

HOME PAGE: http://mypage.unibocconi.eu/albertomanconi/

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Massimo Massa

INSEAD - Finance ( email )

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

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
431
Abstract Views
3,084
rank
97,290
PlumX Metrics