The impact of Financial Times Deutschland news on stock prices: post-announcement drifts and inattention of investors

Alexander Kerl (), Carolin Schürg () and Andreas Walter ()

Financial Markets and Portfolio Management, 2014, vol. 28, issue 4, 409-436

Abstract: In this paper, we analyze the impact of Financial Times Deutschland (FTD) news on stock prices and trading volumes. Based on a sample of all news about German DAX, MDAX, and SDAX companies published in the news section of the FTD between 2006 and 2010, our results show that articles that contain positive (negative) information are associated with significantly positive (negative) abnormal returns and abnormal trading volumes around their publication. Furthermore, our results show an initial underreaction to these articles and subsequent post-publication drift. Based on the inattention hypothesis, we show that high-attention news (proxied by abnormal trading volume) almost instantaneously moves stock prices to their new valuation levels, whereas the price adjustment process takes much longer following low-attention news. Our results also hold within multivariate regressions where we additionally control for stock-specific characteristics (e.g., institutional ownership, size, and price-to-book ratio) as well as other attention-grabbing events (as measured by ad hoc announcements and cover-page news articles). Finally, we show that results primarily hold in the non-crisis period. Copyright Swiss Society for Financial Market Research 2014

Keywords: Underreaction; Media coverage; News; Abnormal trading volume; Investor inattention; G12; G14 (search for similar items in EconPapers)
Date: 2014
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DOI: 10.1007/s11408-014-0238-9

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