Revealed Institutional Information Production and Anomaly Returns
70 Pages Posted: 22 Sep 2022 Last revised: 7 Feb 2024
Date Written: September 22, 2022
Abstract
We show that financial media reveals institutional investors’ information production about industries, which stimulates more production of fundamental information, increases institutional trading, and accelerates the correction of mispricing. Using over one million Wall Street Journal articles from 1979-2020, we create a new measure of revealed institutional information (InstPred). When InstPred is high, (i) value and momentum returns are 34% to 62% larger, (ii) institutional investors trade anomalies more, and (iii) information production via downloads of SEC filings increases. Our results are reinforced by quasi-exogenous variation in industries' investor-WSJ connections and cannot be explained by other informative measures including sentiment.
Keywords: Media, Crowd Sourcing, Anomaly, Value Premium, Momentum, WSJ, Institutional Investors
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