Political Polarization in Financial News

44 Pages Posted: 24 Feb 2020 Last revised: 19 Nov 2021

See all articles by Eitan Goldman

Eitan Goldman

Indiana University - Kelley School of Business - Department of Finance; European Corporate Governance Institute (ECGI)

Nandini Gupta

Indiana University - Kelley School of Business - Department of Finance

Ryan D. Israelsen

Michigan State University - Department of Finance

Date Written: November 17, 2021

Abstract

Standard explanations for the political polarization of the news do not apply to financial news. Nevertheless, comparing coverage of the same firm-specific events by newspapers with opposing ideologies, we find strong evidence of political polarization in corporate financial news on both the intensive and extensive margins of coverage. We show that politics-induced disagreement in financial news about a stock leads to an increase in trading in that stock, and herding by investors who read the same news, indicating that political polarization leads to information segregation among investors.

Keywords: Media bias, Financial news, Finance and politics, Textual analysis, Trading volume, Individual investors

JEL Classification: G30, G12, G14, D72

Suggested Citation

Goldman, Eitan and Gupta, Nandini and Israelsen, Ryan D., Political Polarization in Financial News (November 17, 2021). Available at SSRN: https://ssrn.com/abstract=3537841 or http://dx.doi.org/10.2139/ssrn.3537841

Eitan Goldman

Indiana University - Kelley School of Business - Department of Finance ( email )

1309 E. 10th St.
Bloomington, IN 47405
United States
812-856-0749 (Phone)

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Nandini Gupta (Contact Author)

Indiana University - Kelley School of Business - Department of Finance ( email )

1309 E. 10th St.
Bloomington, IN 47405
United States
812-855-3416 (Phone)
812-855-5875 (Fax)

Ryan D. Israelsen

Michigan State University - Department of Finance ( email )

315 Eppley Center
East Lansing, MI 48824-1122
United States

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