Working Paper: CEPR ID: DP9653
Authors: Jol Peress
Abstract: The media are increasingly recognized as key players in financial markets. I investigate their causal impact on trading and price formation by examining national newspaper strikes in several countries. Trading volume falls 12% on strike days. The dispersion of stock returns and their intraday volatility are reduced by 7%, while aggregate returns are unaffected. Moreover, an analysis of return predictability indicates that newspapers propagate news from the previous day. These findings demonstrate that the media contribute to the efficiency of the stock market by improving the dissemination of information among investors and its incorporation into stock prices.
Keywords: Informational diffusion; Market efficiency; Media
JEL Codes: G14
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| newspaper strikes (J52) | trading volume (G15) |
| newspaper strikes (J52) | dispersion of stock returns (C46) |
| newspaper strikes (J52) | intraday volatility (C58) |
| newspaper strikes (J52) | trading intensity (F12) |
| newspaper strikes (J52) | predictability of returns (G17) |
| newspaper strikes (J52) | retail investors' trading behavior (G41) |
| newspaper strikes (J52) | aggregate market returns (G12) |