Media and the Stock Market: A CAT and CAR Analysis

42 Pages Posted: 21 Jun 2018 Last revised: 10 May 2019

See all articles by David Ardia

David Ardia

HEC Montreal - Department of Decision Sciences

Keven Bluteau

University of Neuchatel, Institute of Financial Analysis, Students; Vrije Universiteit Brussel (VUB)

Kris Boudt

Ghent University; Vrije Universiteit Brussel; Vrije Universiteit Amsterdam

Date Written: May 8, 2019

Abstract

We introduce the Cumulative Abnormal Tone (CAT) event study methodology for analyzing the dynamic relationship between printed media news and cumulative abnormal returns (CAR) around events. We apply the CAT event study methodology to media news about the firm published in a window around the quarterly earnings announcements of non-financial S&P 500 firms over the period 2000-2016. We document that there is an abnormal media tone not only on the three days around the earnings announcement, but that there is a substantial drift in the days following the announcement. We also find that the media tone is more sensitive to negative earnings surprises than positive ones. Finally, we report empirical evidence that the abnormal tone of web publications at the earnings announcement date predicts a stock price reversal in the month following the announcement.

Keywords: abnormal return, abnormal tone, earnings announcements, event study, news media, sentometrics

JEL Classification: G14, G17, M40

Suggested Citation

Ardia, David and Bluteau, Keven and Boudt, Kris, Media and the Stock Market: A CAT and CAR Analysis (May 8, 2019). Available at SSRN: https://ssrn.com/abstract=3192064 or http://dx.doi.org/10.2139/ssrn.3192064

David Ardia

HEC Montreal - Department of Decision Sciences ( email )

3000 C├┤te-Sainte-Catherine Road
Montreal, QC H2S1L4
Canada

Keven Bluteau (Contact Author)

University of Neuchatel, Institute of Financial Analysis, Students ( email )

Pierre-a-Mazel,7
Neuchatel
Switzerland

Vrije Universiteit Brussel (VUB) ( email )

Pleinlaan 2
http://www.vub.ac.be/
Brussels, 1050
Belgium

Kris Boudt

Ghent University ( email )

Sint-Pietersplein 5
Gent, 9000
Belgium

Vrije Universiteit Brussel ( email )

Pleinlaan 2
http://www.vub.ac.be/
Brussels, 1050
Belgium

Vrije Universiteit Amsterdam ( email )

De Boelelaan 1105
Amsterdam, ND North Holland 1081 HV
Netherlands

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