Bank of Israel Research Departmen t “Much Ado about Nothing”? The Effect of Print Media Tone on Stock Indices Mosi Rosenboim,a Yossi Saadon, b and Ben Z. Schreiber c Discussion Paper No. 2018.10 October 2018 ___________________ Bank of Israel; http://www.boi.org.il a Ben-Gurion University, Faculty of Management,
[email protected] b Bank of Israel Research Department and Sapir College,
[email protected] c (corresponding author) Bank of Israel Information and Statistics Department and Bar-Ilan University,
[email protected] The authors thank Alon Eizenberg, Ron Kaniel, Doron Kliger, Ilan Kremer, Nathan Sussman, and the participants at the Bank of Israel Research Department seminar, the Bar-Ilan University AMCB forum, and the Ben-Gurion University research seminar, for their helpful comments and suggestions. We specially thank 'Ifat Media Research' company for providing us a unique database and the tone classifications. We also thank Yonatan Schreiber for technical assistance. Any views expressed in the Discussion Paper Series are those of the authors and do not necessarily reflect those of the Bank of Israel חטיבת המחקר , בנק ישראל ת"ד 780 ירושלים 91007 Research Department, Bank of Israel. POB 780, 91007 Jerusalem, Israel Abstract We translate print media coverage into a gauge of human sentiment and the equivalent advertisement value, and find that the tone of media coverage substantially impacts stock markets. The tone has a positive effect on both overnight and daily stock returns but not on intraday returns, while conditional variance and daily price gaps are negatively influenced. This effect is significant on days of sharp price declines.