Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/121490
Authors: 
Bosman, Ronald
Kräussl, Roman
Mirgorodskaya, Elizaveta
Year of Publication: 
2015
Series/Report no.: 
CFS Working Paper Series 522
Abstract: 
We investigate the effect of the tone of news on investor stock price expectations and beliefs. In an experimental study we ask subjects to estimate a future stock price for twelve real listed companies. As additional information we provide them with historical stock prices and extracts from real newspaper articles. We propose a way to manipulate the tone of news extracts without distorting its content. Subjects in different treatment groups read news items that are written either in positive or negative tone for each stock. We find that subjects tend to predict a significantly higher (lower) return for stocks after reading positive (negative) tone news. The effect is especially pronounced for stocks with poor past performance. Subjects are more likely to be optimistic (pessimistic) about the economy and to buy (sell) stocks after reading positive (negative) than negative (positive) tone news. Our results show that the news media might affect not only how investors perceive information, but also what they do in response to it.
Subjects: 
Tone
News
Framing Effect
Price Expectations
Investor Sentiment
Investment Decisions
Experiment
JEL: 
D83
G02
G11
Document Type: 
Working Paper

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