How Does News Coverage Affect the World of Finance?

How Does News Coverage Affect the World of Finance?

How Does News Coverage Affect the World of Finance?

Columbia Business School

7 April 2017

Can a series of news articles make a stock rise? Can a tweet send a market into turmoil? Can a financial TV segment have a lasting impact on a firm’s performance?

These are questions that experts gathered together to discuss at the 2nd Annual News and Finance Conference at Columbia Business School, organised by the News and Finance Initiative within the School’s Program for Financial Studies. The initiative is supported by lead industry sponsors Bank of America Merrill Lynch and JPMorgan Chase, and by affiliate industry sponsor Morgan Stanley.

Good Publicity Is a Stock’s Best Friend

The final presentation came from Alexander Hillert, the House of Finance Professor of Sustainable Asset Management at Goethe University, Frankfurt.

His research found that more media coverage and better firm visibility among investors and consumers leads to higher returns and stronger sales. 

Media coverage can serve as a substitute for product market advertising. If a firm gets a lot of media coverage, then this can help to attract consumers to a firm's products, and so consumers become aware of that product and consider buying this product because, if ... the newspaper coverage is positive, chances are it also improve[s] consumers' attitude towards the firm's products,” Hillert explained.

Hillert’s research found that more visible firms become more profitable over the next three years, and that investors do not price in the benefits of this visibility adequately.

The bottom line? Companies might want to invest in a good public relations department.