Market reaction to second-hand news: inside the attention-grabbing hypothesis

Enrico Maria Cervellati, Riccardo Ferretti and Pierpaolo Pattitoni

Applied Economics, 2014, vol. 46, issue 10, 1108-1121

Abstract: This article investigates whether the market reaction to second-hand information is due to price pressure or information dissemination. We use the perspective of attention grabbing to analyse the market reaction to the dissemination of analysts' recommendations published in print media. This perspective is able to explain the asymmetric market reaction to 'buy' and 'sell' advice, which is difficult to rationalize within the price pressure hypothesis. We base our empirical analysis on the content of a weekly column in the most important Italian financial newspaper, which publishes past information and analysts' recommendations on listed companies. Our findings show asymmetric price and volume reactions on the publication day. Contrary to previous evidence, we document a positive relationship between the number of analysts quoted in the column and the price (volume) increase associated with positive recommendations. Because the weekly columns seem to simply attract investors' attention, with no additional new information, observing a reaction positively related to the column's salience (proxied by the number of quoted analysts) is natural. In addition, we find that the market reaction is higher when the order size is lower, i.e., when individual investors' trades constitute a higher fraction of the total trading activity in the market.

Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

Downloads: (external link)
http://hdl.handle.net/10.1080/00036846.2013.866206 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:applec:v:46:y:2014:i:10:p:1108-1121

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/RAEC20

DOI: 10.1080/00036846.2013.866206

Access Statistics for this article

Applied Economics is currently edited by Anita Phillips

More articles in Applied Economics from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().