The Momentum of News
نویسندگان
چکیده
Relying on a comprehensive data set of news releases, we construct monthly firm-level news sentiment scores during the 2000–2014 period and document a news momentum phenomenon that stocks with more positive news in the past generate more positive news in the future. We propose two hypotheses to explain this phenomenon and find that news momentum is driven by the persistence of firms’ fundamentals instead of firms’ information environments. A trading strategy, which combines a long position in a good-news quintile portfolio with a short position in a bad-news portfolio, generates 8.352 percent risk-adjusted return annually. This return anomaly appears on both news and non-news days. Overall, these findings suggest that the crosssectional prediction of news is not fully incorporated into the stock price by investors.
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