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Giving Content to Investor Sentiment: The Role of Media in the Stock Market
Author(s) -
TETLOCK PAUL C.
Publication year - 2007
Publication title -
the journal of finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 18.151
H-Index - 299
eISSN - 1540-6261
pISSN - 0022-1082
DOI - 10.1111/j.1540-6261.2007.01232.x
Subject(s) - market liquidity , pessimism , stock market , proxy (statistics) , economics , volatility (finance) , financial economics , stock (firearms) , monetary economics , econometrics , mathematics , mechanical engineering , paleontology , philosophy , epistemology , horse , biology , engineering , statistics
I quantitatively measure the interactions between the media and the stock market using daily content from a popular Wall Street Journal column. I find that high media pessimism predicts downward pressure on market prices followed by a reversion to fundamentals, and unusually high or low pessimism predicts high market trading volume. These and similar results are consistent with theoretical models of noise and liquidity traders, and are inconsistent with theories of media content as a proxy for new information about fundamental asset values, as a proxy for market volatility, or as a sideshow with no relationship to asset markets.