Abstract

Using a Vector Autoregression framework, this paper investigates the dynamic relationship between the intensity of negative media speculation and the market performance of financial institutions. Evidence is provided that over the sub-prime crisis period pessimistic coverage Granger-caused the returns on banking indices, while causality in the opposite direction proved weaker. These findings may imply that journalists not only report on the state of economic reality, but also play an active role in creating it. Investors acting upon sentiment implicit in media reports would have been able to improve their investment performance, as measured by Sharpe ratios and Jensen's alphas.

Year of Publication
2013
Journal
Journal of Economic Behavior & Organization
URL
https://www.sciencedirect.com/science/article/pii/S0167268111002617?via%3Dihub
DOI
https://doi.org/10.1016/j.jebo.2011.10.012
Download citation

The role of media in the credit crunch: The case of the banking sector.

Associate Professor, Department of Finance

Citation: The role of media in the credit crunch: The case of the banking sector. . Journal of Economic Behavior & Organization. 2013. doi:https://doi.org/10.1016/j.jebo.2011.10.012

In: Journal of Economic Behavior & Organization

Published by: , 2013

Cited by: