Media-expressed negative tone and firm-level stock returns

Khurshid Ahmad, JingGuang Han, Elaine Hutson, Colm Kearney and Sha Liu

Open Access publications from Research Repository, University College Dublin

Abstract: We build a corpus of over 5½ million news articles on 20 large US firms over the 10-year period from January 2001 to December 2010, and use it to study the time-varying nature of the relation between media-expressed firm-specific tone and firm-level returns. By estimating a series of separate rolling window vector autoregressive (VAR) models for each firm, we show how media-expressed negative tone impacts firm-level returns episodically in ways that vary across firms and over time. We find that firms experience prolonged periods during which media-expressed tone has no effect on returns, and occasional episodes when it has a significant impact. During the significant episodes, its impacts are sometimes quickly reversed and at other times they endure — implying that media comment and analysis can sometimes be sentiment (or noise), but it can also contain value-relevant information or news. Our findings are in general consistent with efficiently functioning markets in which the media assists with the processing of complex information.

Keywords: Textual analysis; Media-expressed tone; Negative sentiment; News; Market efficiency (search for similar items in EconPapers)
Pages: 21 pages
Date: 2016-04
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Citations: View citations in EconPapers (28)

Published in: Journal of Corporate Finance, 37() 2016-04

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http://hdl.handle.net/10197/8208 Open Access version, 2016 (application/pdf)

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Journal Article: Media-expressed negative tone and firm-level stock returns (2016)
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