WORKING PAPER Asset returns, news topics, and media NORGES BANK RESEARCH effects 17 | 2017 VEGARD H. LARSEN AND LEIF ANDERS THORSRUD Working papers fra Norges Bank, fra 1992/1 til 2009/2 kan bestilles over e-post: NORGES BANK
[email protected] WORKING PAPER XX | 2014 Fra 1999 og senere er publikasjonene tilgjengelige på www.norges-bank.no RAPPORTNAVN Working papers inneholder forskningsarbeider og utredninger som vanligvis ikke har fått sin endelige form. Hensikten er blant annet at forfatteren kan motta kommentarer fra kolleger og andre interesserte. Synspunkter og konklusjoner i arbeidene står for forfatternes regning. Working papers from Norges Bank, from 1992/1 to 2009/2 can be ordered by e-mail:
[email protected] Working papers from 1999 onwards are available on www.norges-bank.no Norges Bank’s working papers present research projects and reports (not usually in their final form) and are intended inter alia to enable the author to benefit from the comments of colleagues and other interested parties. Views and conclusions expressed in working papers are the responsibility of the authors alone. ISSN 1502-819-0 (online) ISBN 978-82-7553-999-9 (online) 2 Asset returns, news topics, and media effects∗ Vegard H. Larseny Leif Anders Thorsrudz September 19, 2017 Abstract We decompose the textual data in a daily Norwegian business newspaper into news topics and investigate their predictive and causal role for asset prices. Our three main findings are: (1) a one unit innovation in the news topics predict roughly a 1 percentage point increase in close-to-open returns and significant continuation patterns peaking at 4 percentage points after 15 business days, with little sign of reversal; (2) simple zero-cost news-based investment strategies yield significant an- nualized risk-adjusted returns of up to 20 percent; and (3) during a media shortage, due to an exogenous strike, returns for firms particularly exposed to our news mea- sure experience a substantial fall.