Rumor Has It

Sensationalism in Financial Media

Kenneth R. Ahern, Denis Sosyura

Research output: Contribution to journalArticle

29 Citations (Scopus)

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 languageEnglish (US)
Pages (from-to)2050-2093
Number of pages44
JournalReview of Financial Studies
Volume28
Issue number7
DOIs
StatePublished - Jan 1 2015
Externally publishedYes

Fingerprint

Rumor
Incentives
Investors
Predictive power
Mergers
Target price
Reversal
Expertise
Industry
Language
Journalists
Media coverage
Overreaction
Asset prices
News
Education
Limited attention

Keywords

  • G14
  • G34
  • L82

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics

Cite this

Rumor Has It : Sensationalism in Financial Media. / Ahern, Kenneth R.; Sosyura, Denis.

In: Review of Financial Studies, Vol. 28, No. 7, 01.01.2015, p. 2050-2093.

Research output: Contribution to journalArticle

Ahern, Kenneth R. ; Sosyura, Denis. / Rumor Has It : Sensationalism in Financial Media. In: Review of Financial Studies. 2015 ; Vol. 28, No. 7. pp. 2050-2093.
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