Abstract
Media news may cover multiple firms in one article, which establishes a media connection across firms. We propose a media connection strength (MCS) measure between two given firms, which is defined as the number of news articles co-mentioning these two firms. We show that the MCS measure can significantly explain and forecast return comovement of media-connected firm-pairs. Further analyses show that our results are robust to various alternative explanations. We argue that the MCS measure can capture comprehensive and complex correlated fundamental information among media-connected firms and hence may provide a new mechanism for return comovement beyond the existing rational- and behavioral-based explanations.
| Original language | English |
|---|---|
| Article number | 104191 |
| Journal | Journal of Economic Dynamics and Control |
| Volume | 130 |
| Early online date | 13 Jul 2021 |
| DOIs | |
| Publication status | Published - Sept 2021 |
| Externally published | Yes |
Bibliographical note
Publisher Copyright:© 2021
Funding
We thank Dashan Huang, Jianfeng Hu, Roger Loh, Weikai Li, Chishen Wei, Weina Zhang, and participants at 2019 SMU Summer Camp and Conference on the Theories and Practices of Securities and Financial Markets 2019 for their helpful suggestions. We also thank Eugene Fama and Kenneth French for sharing the Fama-French factors returns, Malcolm Baker and Jeffrey Wurgler for sharing the sentiment index data, and Gerard Hoberg and Gordon M. Phillips for sharing the text-based network industry classifications (TNIC) data. Li Guo acknowledges the financial support sponsored by Shanghai Pujiang Program. Jun Tu acknowledges that the study was funded through a research grant from Sim Kee Boon Institute for Financial Economics. All errors remain our responsibility.
Keywords
- Complex economic linkages
- Fundamental comovement
- Journalists collective opinions
- News linkages
- Return comovement
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