CEU Electronic Theses and Dissertations, 2012
| Author | Nyéki, Gábor |
|---|---|
| Title | The Stock Market Impact of the Foreign and the Domestic Media |
| Summary | Do foreign news matter for domestic investments? The answer’s relevant for the theory of market efficiency as well as for the practice of communication in business and in politics. This thesis is an investigation of the issue. I study stock price movements of Indian companies, relating them to mentions in the Indian Economic Times and the British Financial Times. I test three hypotheses: (1) efficient markets, (2) media impact on stock markets, and (3) foreign media impact. Stock market data shows patterns that suggest both general media impact and foreign media impact in particular. Price behaviour around company mentions also provides evidence against efficient markets. It is evident that there is a relationship between Indian mentions and price movements. Looking at single Economic Times mentions, absolute market- adjusted returns are higher than usual one day before the mention and on the day of the mention. The relationship between mentions and trading activity is further illustrated by simple correlation coefficients between market-adjusted returns one day before and on mention days. For Indian mentions, the coefficient is .049 (p-value = .01). For British mentions, it is .0902 (p-value = .08) for all mentions, and r = .2206 (p-value = .01) for only mentions that are not preceded by Indian mentions. These patterns are robust. I also capture them by regressing market-adjusted returns on mentions and lagged returns. The results from the correlation coeffi- cients are preserved in the regressions, with and without controls as well. Over- all the evidence leaves space for speculation about foreign investor behaviour. What is a fact is that Financial Times mentions are associated with daily return reversal—the same behaviour as without any mentions—if they follow Indian mentions. |
| Supervisor | Szeidl, Adam |
| Department | Economics MA |
| Full text | https://www.etd.ceu.edu/2012/nyeki_gabor.pdf |
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