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Media Coverage and the Cross-section of Stock Returns




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    • Lily Fang and Joel Peress are both at INSEAD. We would like to thank Bernard Dumas, Edward Fang, Harald Hau, Pierre Hillion, Harrison Hong, Soeren Hvidkjaer, Charles Jones, Massimo Massa, Steve Monahan, Paul Tetlock, Clara Vega, Kent Womack, Lu Zheng, and seminar participants at Imperial College London, INSEAD, Lehman Brothers, Numeric Investors LLC, University of Wisconsin Madison, and Singapore International Conference on Finance (2007) for helpful comments and discussions. We are also grateful to an anonymous referee and Campbell Harvey (the editor) for many insightful comments and detailed suggestions. We thank William Fisk, Shirish Tatikonda, Pradeed Mittal, Ananda Kumar, Sriram Ganesan, and Sriram Subramaniam for outstanding assistance with the data collection process.


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.

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