Abstract
The media has an incentive to publish sensational news. We study how this incentive affects the accuracy of media coverage in the context of merger rumors. Using a novel dataset, we find that accuracy is predicted by a journalist's experience, specialized education, and industry expertise. Conversely, less accurate stories use ambiguous language and feature well-known firms with broad readership appeal. Investors do not fully account for the predictive power of these characteristics, leading to an initial target price overreaction and a subsequent reversal, consistent with limited attention. Overall, we provide novel evidence on the determinants of media accuracy and its effect on asset prices.
Original language | English (US) |
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Pages (from-to) | 2050-2093 |
Number of pages | 44 |
Journal | Review of Financial Studies |
Volume | 28 |
Issue number | 7 |
DOIs | |
State | Published - Jul 1 2015 |
Externally published | Yes |
Keywords
- G14
- G34
- L82
ASJC Scopus subject areas
- Accounting
- Finance
- Economics and Econometrics