Tossed by the tides of emotion: The impact of online media sentiment on stock returns

Liang Chang, Xiaojun Liang and Na Tan

Journal of Behavioral and Experimental Finance, 2025, vol. 46, issue C

Abstract: This study examines the impact of online media sentiment on stock returns using a dataset of over 8.3 million online financial media reports covering Chinese A-share listed companies. The findings reveal that more positive media sentiment towards a company is associated with higher average monthly stock returns. A zero-investment arbitrage strategy, constructed by buying stocks with high media sentiment and selling those with low media sentiment, yields a significant monthly premium of 4%. These effects are particularly pronounced for stocks with higher investor attention and lower liquidity. Moreover, even after controlling for known risk factors or during IPO quiet periods when no new information is introduced, companies with positive media sentiment continue to exhibit higher stock returns. Further analysis shows that media sentiment can explain approximately 4% to 12% of various market anomalies, and the media sentiment premium exhibits return reversals. This research uncovers the unique mechanisms of media effects in emerging markets and provides robust support for the limited attention theory from behavioral finance.

Keywords: Media sentiment; Asset pricing; Limited attention; IPO quiet period (search for similar items in EconPapers)
JEL-codes: G11 G12 G41 L82 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:beexfi:v:46:y:2025:i:c:s2214635025000267

DOI: 10.1016/j.jbef.2025.101045

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