Ninety Years of Media Coverage and the Cross-Section of Stock Returns

Abstract

Using a novel dataset on New York Times coverage of U.S. firms from 1924 to 2013, we re-examine the relation between media coverage and stock returns. The relation between changes in media coverage and returns is consistent with an attention-driven price pressure effect: Top-quintile outperform bottom-quintile coverage change stocks by 10.68% during the formation year. Over the next two years, these stocks underperform their counterparts by 5.04%. In contrast to previous findings, the level of media coverage positively predicts stock returns. Top-quintile outperform bottom-quintile coverage stocks by 2.76% per year (Sharpe Ratio of 0.48, Momentum: 0.49). This is consistent with the media having a positive effect on corporate governance and profitability, which is not adequately priced.