Media Sentiment and Trading Behaviour of Different Trader Types Around Earnings Announcements
34 Pages Posted: 3 Feb 2016 Last revised: 27 Jan 2018
Date Written: February 1, 2016
Abstract
This paper investigates how the prevailing sentiment portrayed by the media influences abnormal net purchases of retail and institutional traders around earnings announcements in ASX200 constituent firms from 2009-2013. We find that media sentiment influences institutional traders into overacting to both good and bad earnings news measured using analyst forecast error. In contrast, retail traders are indifferent to the influence of media sentiment in either positive or negative unexpected earnings environment. Further analysis reveals that their trading decisions depend upon media sentiment solely. We also find that media sentiment complements the traditional measures of market-wide sentiment such as the consumer sentiment index (CSI) as it represents timelier information.
Keywords: Media sentiment; abnormal net purchase; unexpected earnings; analyst forecast error
JEL Classification: G30
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