Media Coverage and the Cross‐section of Stock Returns

TLDR

Mass media can alleviate informational frictions and affect security pricing even without providing genuine news. The study investigates the relationship between media coverage and expected stock returns. The authors analyze the cross‑sectional association between media coverage and expected stock returns. Stocks with no media coverage earn higher returns than those with high coverage, a pattern that is stronger for small firms, high individual ownership, low analyst following, and high idiosyncratic volatility, suggesting that broader information dissemination depresses expected returns.

Abstract

ABSTRACT By reaching a broad population of investors, mass media can alleviate informational frictions and affect security pricing even if it does not supply genuine news. We investigate this hypothesis by studying the cross‐sectional relation between media coverage and expected stock returns. We find that stocks with no media coverage earn higher returns than stocks with high media coverage even after controlling for well‐known risk factors. These results are more pronounced among small stocks and stocks with high individual ownership, low analyst following, and high idiosyncratic volatility. Our findings suggest that the breadth of information dissemination affects stock returns.