Article2013

PRESS COVERAGE AND STOCK PRICE DEVIATION FROM FUNDAMENTAL VALUE

Chia‐Wei Chen · Christos Pantzalis · Jung Chul Park

73 citations0/0 files storedThe Journal of Financial Research

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Financial Markets and Investment Strategies Corporate Finance and Governance Financial Analysis and Corporate Governance

Abstract

Abstract We find that excessively high levels of press coverage can significantly exaggerate stock price deviation from fundamental value. We show that being “in the news” a lot is associated with both greater liquidity and more information risk. When we examine signed mispricing, we find that the effect of abnormal press coverage is significant only for stocks with high relative valuations, consistent with the concurrent existences of media‐induced sentiment and media bias. Indeed, we uncover that the sentiment effect is attenuated when firms with low valuations receive heavy coverage in the local press.

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References

1979Prospect Theory: An Analysis of Decision under Risk 1988Prospect theory: An analysis of decision under risk 1958An Economic Theory of Democracy.1973Risk, Return, and Equilibrium: Empirical Tests 2008Estimating Standard Errors in Finance Panel Data Sets: Comparing Approaches 2002Illiquidity and stock returns: cross-section and time-series effects 1985Continuous Auctions and Insider Trading 2001Information asymmetry, corporate disclosure, and the capital markets: A review of the empirical disclosure literature

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