Abstract
This paper investigates the cross-sectional relation between industry-level media tone and expected stock returns in China. Using a machine learning technique to establish a proxy for industry-level media tone, we find that stocks in industries with more positive media tone earn significantly higher future returns than these with more negative media tone. Specifically, relative to stock-specific media tone, industry media tone plays a dominant role in forecasting stock returns. Moreover, the return premium for higher industry-level media tone continues for two months, and the returns are positive though insignificant within half a year, indicating that the media contains fundamental information.
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