Media Sentiment and Trading Behaviour of Different Trader Types Around Earnings Announcements

34 Pages Posted: 3 Feb 2016 Last revised: 27 Jan 2018

See all articles by Daniel Cahill

Daniel Cahill

University of Western Australia, Buiness School

Marvin Wee

Financial Research Network (FIRN); Australian National University (ANU)

Joey (Wenling) Yang

The University of Western Australia

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

Suggested Citation

Cahill, Daniel and Wee, Marvin and Wee, Marvin and Yang, Joey (Wenling), Media Sentiment and Trading Behaviour of Different Trader Types Around Earnings Announcements (February 1, 2016). Available at SSRN: https://ssrn.com/abstract=2726032 or http://dx.doi.org/10.2139/ssrn.2726032

Daniel Cahill

University of Western Australia, Buiness School ( email )

35 Stirling Highway
Crawley, Western Australia 6009
Australia

Marvin Wee

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Australian National University (ANU) ( email )

The Australian National University
College of Business and Economics
Canberra, 2601
Australia
+61 2 61250416 (Phone)

Joey (Wenling) Yang (Contact Author)

The University of Western Australia ( email )

35 Stirling Highway
Crawley, Western Australia 6009
AUSTRALIA

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