Time Variation in the News–Returns Relationship.
| Title: | Time Variation in the News–Returns Relationship. |
|---|---|
| Authors: | Glasserman, Paul1 (AUTHOR), Li, Fulin2 (AUTHOR), Mamaysky, Harry1 (AUTHOR) hm2646@columbia.edu |
| Source: | Journal of Financial & Quantitative Analysis. Feb2025, Vol. 60 Issue 1, p258-294. 37p. |
| Subject Terms: | *Stock prices, *Financial institutions, *Stock ownership, *Mass media & business, *Risk management in business, *Market sentiment, *Rate of return on stocks, Attribution of news |
| Abstract: | The speed of stock price reaction to news exhibits substantial time variation. Higher risk-bearing capacity of financial intermediaries, lower passive ownership of stocks, and more informative news increase price responses to contemporaneous news; surprisingly, these interaction variables also increase price responses to lagged news (underreaction). A simple model with limited attention and three investor types (institutional, noninstitutional, and passive) predicts the observed variation in news responses. A long–short trading strategy based on news sentiment earns high returns, which increase when conditioning on the interaction variables. The interactions we document are robust to the choice of news source. [ABSTRACT FROM AUTHOR] |
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| Database: | Business Source Complete |
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