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The impact of Financial Times Deutschland news on stock prices: post-announcement drifts and inattention of investors

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In this paper, we analyze the impact of Financial Times Deutschland (FTD) news on stock prices and trading volumes. Based on a sample of all news about German DAX, MDAX, and SDAX companies published in the news section of the FTD between 2006 and 2010, our results show that articles that contain positive (negative) information are associated with significantly positive (negative) abnormal returns and abnormal trading volumes around their publication. Furthermore, our results show an initial underreaction to these articles and subsequent post-publication drift. Based on the inattention hypothesis, we show that high-attention news (proxied by abnormal trading volume) almost instantaneously moves stock prices to their new valuation levels, whereas the price adjustment process takes much longer following low-attention news. Our results also hold within multivariate regressions where we additionally control for stock-specific characteristics (e.g., institutional ownership, size, and price-to-book ratio) as well as other attention-grabbing events (as measured by ad hoc announcements and cover-page news articles). Finally, we show that results primarily hold in the non-crisis period.

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  1. Note that we focus only on those news articles in which the respective company is mentioned in the headline itself.

  2. Note that we do not split the sample into high- and low-attention stocks based on stock-specific characteristics, but that we use the level of abnormal trading volume directly before news articles are published to classify the attention level that each specific news article receives (i.e., classification into high- and low-attention news).

  3. Other studies, for example, Fang and Peress (2009), similarly use data from the LexisNexis database. Note that we search for articles on a company only if it belonged to one of the three indices within a respective year. As soon as a company is no longer part of the indices, it is dropped from the sample for that year.

  4. The average circulation of the FTD for 2006–2010 was 107,672 copies per day as reported by the IVW (Informationsgemeinschaft zur Feststellung von Werbeträgern e.V.). The IW (Institut der deutschen Wirtschaft - Köln) publishes a yearly statistic showing that the Financial Times Deutschland continuously took ninth place among German daily newspapers in the period 2006–2010 in terms of copies sold per day.

  5. Note that there is a significant subjective component involved in classifying articles as negative, positive, or neutral news. To limit subjectivity to the greatest extent possible, two of the authors independently classified all news. Only news that both authors classified identically as positive, negative, or neutral is used in our analyses.

  6. Similar figures are found by Schmitz (2007), whose data are exogenously classified by analysts of the research institute Media Tenor.

  7. Our approach of solely looking at articles published on the first two pages results in a focus on new, self-contained information as researched by the FTD. Even if third-party news (such as analyst recommendations) was mentioned, it was normally accompanied by further information and detailed insights.

  8. We estimate OLS parameters for the estimation period using the value-weighted CDAX as the independent variable. The CDAX encompasses the entire universe of stocks that are listed in either the Prime Standard or the General Standard on the Frankfurt Stock Exchange.

  9. Based on the fact that the Corrado rank test eventually leads to less precise estimations due to the reduced number of observations in case of expanding CAR periods, we use the non-parametric generalized rank test (GRANK) proposed by Kolari and Pynnonen (2011) for significance tests of CARs. This test is also robust to serial and cross-sectional correlation of returns as well as to event-induced volatility.

  10. The selected period \([-2,0]\) includes the cumulative abnormal returns of the two days prior to the official publication of a specific news article along with the publication day itself. Thereby, we control for the short-term information leakage effect that can occur in the event information has been made known prior to publication of the news article (i.e., via online early-view publication or other sources). As a robustness check, we divide the market reaction of stocks into the period \([-2, -1]\) and [0, +25], where the latter period includes the publication day return, and find qualitatively identical results.

  11. For the purpose of outlier elimination, we truncate the 2.5th and 97.5th percentile of REL_CAR [+1, +25].

  12. We employ a standard t test for comparing the average trading volume of the period \([-120, -26]\) with the average trading volume of days \([-2,-1]\).

  13. INST_OWNERSHIP is the percentage of total shares held strategically by institutional investors and thus is not available to ordinary investors.

  14. For each article, we download the company’s market capitalization at the beginning of the respective calendar year.

  15. The absolute level of the market reaction appears relatively pronounced. Remember, however, that our sample is comprised of headline stories from the first two pages of the FTD, a location that almost by definition implies that the news is highly significant.

  16. As a robustness check, we divide the market reaction of stocks into the period \([-2,-1]\) and [0, +25], where the latter period includes the publication day return. Both specifications have very similar results.

  17. We obtain similar results if we winsorize the dependent variable REL_CAR [+1, +25] instead of truncating potential outliers.

  18. As a robustness check, we perform all multivariate analyses again using the dependent variable based on the alternative specification that splits the two relevant periods into \([-2,-1]\) versus [0, +25]. Results are robust to this specification.

  19. In addition, the F test and adjusted \(R^{2}\) provide evidence that the model only holds in pre- and post-crisis times.


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We received helpful suggestions from seminar participants at the “Marketing Meets Wall Street” conference in Frankfurt/Main. We also thank the anonymous referee for his comments and helpful suggestions.

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Correspondence to Alexander Kerl.

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Kerl, A., Schürg, C. & Walter, A. The impact of Financial Times Deutschland news on stock prices: post-announcement drifts and inattention of investors. Financ Mark Portf Manag 28, 409–436 (2014).

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