Local Media and Individual Trading

38 Pages Posted: 2 Feb 2017

See all articles by Yeon Sik Eric Cho

Yeon Sik Eric Cho

University of California, Los Angeles (UCLA) - Finance Area, Students

Date Written: January 30, 2017

Abstract

Does local media affect how individual traders trade? The role of media on the stock market has only recently started receiving attention in the finance literature. This literature has mainly focused on single, nationwide press sources such as the Wall Street Journal and DJ Wire. As a consequence, the effect of local media on the markets has remained largely unexplored, in spite of the relatively large role of local media in informing households and the heterogeneity of local media across regions. This study investigates one facet of the relationship between local media and the markets: the incremental market influence of local media over other nationwide media. I find that local media predicts individual investors' trading patterns. In particular, I find that cities in which the local media mentions a particular stock see a substantial increase proportion of households that trade the stock over the subsequent periods. Using earnings announcement related news as a plausibly exogenous news shock, I also present evidence that this relation may be causal. Lastly, I present evidence that the local media effect may work through a salience channel.

Keywords: Household Portfolio Choice, Local Media, Information

JEL Classification: D14, D84, G02, G11

Suggested Citation

Cho, Yeon Sik Eric, Local Media and Individual Trading (January 30, 2017). Available at SSRN: https://ssrn.com/abstract=2908264 or http://dx.doi.org/10.2139/ssrn.2908264

Yeon Sik Eric Cho (Contact Author)

University of California, Los Angeles (UCLA) - Finance Area, Students ( email )

Los Angeles, CA
United States

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