Media Narratives and Price Informativeness

65 Pages Posted: 12 Jan 2023 Last revised: 8 Feb 2024

See all articles by Chukwuma Dim

Chukwuma Dim

George Washington University

Francesco Sangiorgi

Frankfurt School of Finance & Management

Grigory Vilkov

Frankfurt School of Finance & Management

Date Written: January 12, 2023

Abstract

We show that an increase in stock return exposure to media attention to narratives, measured with standard methods for extracting topic attention from news text, leads to a lower stock price informativeness about future fundamentals. Empirically, narrative exposure explains over 86% of idiosyncratic variance in the cross-section, and both narrative exposure and non-systematic information channels—idiosyncratic variance and variance related to public information—decrease stock price informativeness. Moreover, stocks with high narrative exposure demonstrate elevated trading volume. To rationalize these results, we develop a theoretical model based on investor disagreement stemming from differential interpretations of media narratives.

Keywords: media narratives, media bias, price informativeness, idiosyncratic risk, noise trading, disagreement, latent demand

JEL Classification: G11, G12, G13, G17

Suggested Citation

Dim, Chukwuma and Sangiorgi, Francesco and Vilkov, Grigory, Media Narratives and Price Informativeness (January 12, 2023). Available at SSRN: https://ssrn.com/abstract=4323093 or http://dx.doi.org/10.2139/ssrn.4323093

Chukwuma Dim

George Washington University ( email )

2121 I Street NW
Washington, DC 20052
United States

Francesco Sangiorgi

Frankfurt School of Finance & Management ( email )

Adickesallee 34
Frankfurt am Main, 60322
Germany

Grigory Vilkov (Contact Author)

Frankfurt School of Finance & Management ( email )

Adickesallee 32-34
Frankfurt am Main, 60322
Germany

HOME PAGE: http://www.vilkov.net

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
666
Abstract Views
3,175
Rank
75,947
PlumX Metrics