Measuring Segmentation in the Financial News Market

Abstract

Measuring the extent of news segmentation is important because it could be a source of investor disagreement. However, for news segmentation to arise, news must have room for interpretation. I infer both room for interpretation and news outlet characteristics from earnings announcement coverage and find evidence of economically significant news segmentation. Moreover, room for interpretation is an important determinant in an outlet's choice of which earnings announcements to cover. The resulting heterogeneous coverage is positively associated with trading volume and return volatility. The findings highlight how interactions between information properties and news market dynamics can influence information diffusion into prices.

Keywords: media coverage, company earnings, information dissemination, differences in beliefs

JEL Classification: M41, G14, L10, D83