Press coverage and stock price deviation from fundamental value

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.

Source: resolved