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News Movers and Shakers in Finance

Published Date: March 14, 2011
Author: Peter Ager Hafez

Brief:

This study provides a methodology to track companies moving in or out of the media spotlight to help predict stock price direction.

Abstract:

This paper shows that an investor evaluating a universe of stocks should be concerned about tracking media coverage and sentiment. The concept of abnormal news liquidity is introduced and is demonstrated to predict long-term price direction when distinguishing between companies moving in or out of the media spotlight. Specifically, this paper shows that when companies moving out of the media spotlight are portrayed positively in the news, they tend to outperform the market over the following year. Likewise, companies that are portrayed negatively tend to significantly underperform the market. For companies moving into the media spotlight, the market tends to either over or underreact to positive and negative news sentiment depending on market conditions.
   
 

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