Media Connection and Return Comovement

36 Pages Posted: 4 Jul 2019 Last revised: 5 Oct 2020

See all articles by Zilin Chen

Zilin Chen

Singapore Management University - Lee Kong Chian School of Business

Li Guo

Fudan University - School of Economics; Shanghai Institute of International Finance and Economics

Jun Tu

Singapore Management University - Lee Kong Chian School of Business

Date Written: August 30, 2020

Abstract

Media news may cover multiple firms in one article, which establishes a media connection across firms. We propose a media connection strength (MCS) measure, which defined as the number of news articles co-mentioning two firms. We find that the MCS measure can capture soft information about the correlated fundamentals between two media-connected firms. Furthermore, we show that the MCS measure can significantly explain and forecast return comovement for media-connected firm pairs. The MCS measure may be considered as a new soft information based explanation for return comovement, beyond the existing hard information based and behavioral based explanations.

Keywords: Media Connection; Comovement; Soft Information.

JEL Classification: G11, G12, G41

Suggested Citation

Chen, Zilin and Guo, Li and Tu, Jun, Media Connection and Return Comovement (August 30, 2020). Available at SSRN: https://ssrn.com/abstract=3414110 or http://dx.doi.org/10.2139/ssrn.3414110

Zilin Chen

Singapore Management University - Lee Kong Chian School of Business ( email )

469 Bukit Timah Road
Singapore
Singapore

Li Guo

Fudan University - School of Economics ( email )

600 GuoQuan Road
Shanghai, 200433
China

Shanghai Institute of International Finance and Economics ( email )

777 Guoding Rd
Wu Jiao Chang, Yangpu District
Shanghai, Shanghai 200017
China

Jun Tu (Contact Author)

Singapore Management University - Lee Kong Chian School of Business ( email )

50 Stamford Road
#04-01
Singapore, 178899
Singapore

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