We investigate whether media attention systematically affects stock prices by exploiting the substantial discrepancy between perceived and actual information content of 6,937 CEO interviews on CNBC. The average cumulative abnormal stock return over the [-2, 0] trading day window is 1.62%, yet prices exhibit strong reversion of 1.08% over the following ten trading days. The magnitude of price response is positively correlated with the viewership as well as the language tone of the CEO. We find that individual investors are net buyers on the interview days, and that they keep on buying if the interview was both carried out by attractive anchorwoman and was watched by more male viewers. The price reversal is attributable to abnormal shortselling volume on interview day. Moreover, we find that the price run-up before the interviews is largely driven by individual investors that are excited even at the pre-announcement of the interview. We also find evidence of asymmetric attention cascade coming from CNBC interview upon the tone of media coverage of the firm, tilted towards the negative.
JEL classifications: G14, G12.
Key words: Market efficiency, investor attention, media, CNBC, individual investors, gender, attention cascade, information cascade.
