Home-Country Media Slant and Equity Prices
64 Pages Posted: 13 Jun 2019 Last revised: 29 Jun 2019
Date Written: June 27, 2019
We study the relation between national newspaper reporting and investor beliefs in the context of the automotive industry across the U.S., Germany, and Japan. Using large-scale hand-coded media data, we show that news about companies is systematically more positive in companies’ home countries than abroad. Home-country media slant increases substantially during bad times for companies. Abnormally high home-media news tone predicts low monthly stock returns. Daily cross-country difference in news tone predicts price deviations of cross-listed stocks. The effects are strongest when news tends to confirm investor prior beliefs and weakest when investors are likely distracted by sports events.
Keywords: media slant, media bias, textual analysis, investor sentiment, cross-listed stocks, confirmatory bias
JEL Classification: L82, D23, F23
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