Financial News Media and Volatility: Is There More to Newspapers than News?

Abstract

Does media coverage of a firm have a causal effect on the volatility of its stock price and, if so, is this of aggregate importance? This paper identifies a robust link between media coverage in the Financial Times print newspaper and a firm’s intra-day stock price volatility. This effect is not driven by persistence in volatility or anticipation of future newsworthy events, but is explained by an increase in trading volume, supporting a salience interpretation. The effect spills over into firms related by the structure of the production network, but does not affect the aggregate level of volatility.

Keywords: Asset pricing, volatility, behavioural finance, news media, text analysis

JEL Classification: G14, G40, C55