Media sentiment and trading strategies of different types of traders

Research output: Contribution to journalArticle

2 Citations (Scopus)

Abstract

This paper investigates how the prevailing sentiment conveyed by the media influences trading by retail and institutional traders around earnings announcements made by ASX200 constituent firms. We find that media sentiment influences institutional traders to overreact to earnings news measured by analyst forecast errors. In contrast, retail traders are indifferent to either positive or negative unexpected earnings in the presence of media sentiment. Further analysis reveals that their trading decisions are affected by media sentiment alone, independent of the earnings surprise. We also find that firm-specific media sentiment complements market-wide sentiment by providing timelier information to investors in shaping their perceptions of unexpected earnings in the Australian market.

Original languageEnglish
Pages (from-to)160-172
Number of pages13
JournalPacific Basin Finance Journal
Volume44
DOIs
Publication statusPublished - 1 Sep 2017

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Sentiment
Traders
Trading strategies
Retail
Investors
Earnings surprises
News
Earnings announcements
Analysts' forecasts
Forecast error

Cite this

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title = "Media sentiment and trading strategies of different types of traders",
abstract = "This paper investigates how the prevailing sentiment conveyed by the media influences trading by retail and institutional traders around earnings announcements made by ASX200 constituent firms. We find that media sentiment influences institutional traders to overreact to earnings news measured by analyst forecast errors. In contrast, retail traders are indifferent to either positive or negative unexpected earnings in the presence of media sentiment. Further analysis reveals that their trading decisions are affected by media sentiment alone, independent of the earnings surprise. We also find that firm-specific media sentiment complements market-wide sentiment by providing timelier information to investors in shaping their perceptions of unexpected earnings in the Australian market.",
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Media sentiment and trading strategies of different types of traders. / Cahill, Daniel; Wee, Marvin; Yang, Joey W.

In: Pacific Basin Finance Journal, Vol. 44, 01.09.2017, p. 160-172.

Research output: Contribution to journalArticle

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AB - This paper investigates how the prevailing sentiment conveyed by the media influences trading by retail and institutional traders around earnings announcements made by ASX200 constituent firms. We find that media sentiment influences institutional traders to overreact to earnings news measured by analyst forecast errors. In contrast, retail traders are indifferent to either positive or negative unexpected earnings in the presence of media sentiment. Further analysis reveals that their trading decisions are affected by media sentiment alone, independent of the earnings surprise. We also find that firm-specific media sentiment complements market-wide sentiment by providing timelier information to investors in shaping their perceptions of unexpected earnings in the Australian market.

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