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Media Coverage and the Cross-Section of Stock Returns

45 Pages Posted: 21 Mar 2007 Last revised: 8 Nov 2011

Lily H. Fang

INSEAD - Finance

Joel Peress

INSEAD - Finance

Date Written: June 5, 2008

Abstract

By reaching a broad population of investors, mass media can alleviate informational frictions and affect security pricing even if it does not supply genuine news. We investigate this hypothesis by studying the cross-sectional relation between media coverage and expected stock returns. We find that stocks with no media coverage earn higher returns than stocks with high media coverage even after controlling for well-known risk-factors. These results are more pronounced among small stocks and stocks with high individual ownership, low analyst following, and high idiosyncratic volatility. Our findings suggest that the breadth of information dissemination affects stock returns.

Keywords: role of media in finance, information, Cross-Section of Stock Returns, alpha

JEL Classification: G12, G14

Suggested Citation

Fang, Lily H. and Peress, Joel, Media Coverage and the Cross-Section of Stock Returns (June 5, 2008). The Journal of Finance, Vol. 64, No. 5, pp. 2023-2052, 2009; AFA 2009 San Francisco Meetings Paper. Available at SSRN: https://ssrn.com/abstract=971202 or http://dx.doi.org/10.2139/ssrn.971202

Lily Fang (Contact Author)

INSEAD - Finance ( email )

Boulevard de Constance
F-77305 Fontainebleau Cedex
France

Joel Peress

INSEAD - Finance ( email )

Boulevard de Constance
F-77305 Fontainebleau Cedex
France
+33 1 60 72 40 00 (Phone)
+33 1 60 72 40 45 (Fax)

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