Media tone and expected stock returns

Sha Liu and Jingguang Han

International Review of Financial Analysis, 2020, vol. 70, issue C

Abstract: We find that media tone reflects firm-level expected returns—firms with low-negative tone stories over a few months earn higher returns in the medium to long term than do firms with high-negative tone stories. The tone premium is driven by consistent outperformance of low-negative stocks, while high-negative stocks do not produce significant abnormal returns. The media tone effect is associated with some common risk factors, among which the size factor plays a consistent and most significant role. The tone effect also reflects differences in firms' idiosyncratic risk, and there is evidence that it is partially related to mispricing and limits to arbitrage.

Keywords: Media tone; Expected returns; Risk; Mispricing (search for similar items in EconPapers)
JEL-codes: G12 G14 G30 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:70:y:2020:i:c:s1057521920301666

DOI: 10.1016/j.irfa.2020.101522

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