Media sentiment and trading strategies of different types of traders

Daniel Cahill; Marvin Wee; Joey W. Yang

doi:10.1016/j.pacfin.2017.07.001

Media sentiment and trading strategies of different types of traders

Daniel Cahill, Marvin Wee, Joey W. Yang^*

^*Corresponding author for this work

Research output: Contribution to journal › Article › peer-review

8 Citations (Scopus)

Abstract

This paper investigates how the prevailing sentiment conveyed by the media influences trading by retail and institutional traders around earnings announcements made by ASX200 constituent firms. We find that media sentiment influences institutional traders to overreact to earnings news measured by analyst forecast errors. In contrast, retail traders are indifferent to either positive or negative unexpected earnings in the presence of media sentiment. Further analysis reveals that their trading decisions are affected by media sentiment alone, independent of the earnings surprise. We also find that firm-specific media sentiment complements market-wide sentiment by providing timelier information to investors in shaping their perceptions of unexpected earnings in the Australian market.

Original language	English
Pages (from-to)	160-172
Number of pages	13
Journal	Pacific Basin Finance Journal
Volume	44
DOIs	https://doi.org/10.1016/j.pacfin.2017.07.001
Publication status	Published - Sept 2017
Externally published	Yes

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10.1016/j.pacfin.2017.07.001

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title = "Media sentiment and trading strategies of different types of traders",

abstract = "This paper investigates how the prevailing sentiment conveyed by the media influences trading by retail and institutional traders around earnings announcements made by ASX200 constituent firms. We find that media sentiment influences institutional traders to overreact to earnings news measured by analyst forecast errors. In contrast, retail traders are indifferent to either positive or negative unexpected earnings in the presence of media sentiment. Further analysis reveals that their trading decisions are affected by media sentiment alone, independent of the earnings surprise. We also find that firm-specific media sentiment complements market-wide sentiment by providing timelier information to investors in shaping their perceptions of unexpected earnings in the Australian market.",

keywords = "Abnormal net purchase, Analyst forecast error, Media sentiment, Unexpected earnings",

author = "Daniel Cahill and Marvin Wee and Yang, {Joey W.}",

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AB - This paper investigates how the prevailing sentiment conveyed by the media influences trading by retail and institutional traders around earnings announcements made by ASX200 constituent firms. We find that media sentiment influences institutional traders to overreact to earnings news measured by analyst forecast errors. In contrast, retail traders are indifferent to either positive or negative unexpected earnings in the presence of media sentiment. Further analysis reveals that their trading decisions are affected by media sentiment alone, independent of the earnings surprise. We also find that firm-specific media sentiment complements market-wide sentiment by providing timelier information to investors in shaping their perceptions of unexpected earnings in the Australian market.

KW - Abnormal net purchase

KW - Analyst forecast error

KW - Media sentiment

KW - Unexpected earnings

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JO - Pacific Basin Finance Journal

JF - Pacific Basin Finance Journal

ER -

Media sentiment and trading strategies of different types of traders

Abstract

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