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The Media and the Diffusion of Information in Financial Markets: Evidence from Newspaper Strikes
Author(s) -
PERESS JOEL
Publication year - 2014
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/jofi.12179
Subject(s) - newspaper , predictability , stock (firearms) , financial market , stock market , economics , volatility (finance) , market efficiency , monetary economics , financial economics , business , finance , advertising , mechanical engineering , paleontology , horse , quantum mechanics , engineering , biology , physics
The media are increasingly recognized as key players in financial markets. I investigate their causal impact on trading and price formation by examining national newspaper strikes in several countries. Trading volume falls 12% on strike days. The dispersion of stock returns and their intraday volatility are reduced by 7%, while aggregate returns are unaffected. Moreover, analysis of return predictability indicates that newspapers propagate news from the previous day. These findings demonstrate that the media contribute to the efficiency of the stock market by improving the dissemination of information among investors and its incorporation into stock prices.