Supply and Demand: Propagation and Absorption of News

The importance of the media for individual and market behavior cannot be overstated. For example, a front-page article in the New York Times that mostly reprints information from six months prior can cause a company’s stock price to jump by over 300%. To better understand the channels through which the media affects markets and the resulting implications for news production, we study how individuals process information in news. Do readers display a preference for news with a positive slant? Are consumers of news segregated based on the media outlets they favor? Do individuals recognize which news is novel, and which simply reprints old information? While these questions are grounded in fundamental human psychology, they are also inextricably linked to the rapidly changing technology of news production. With over a million stories a day passing through the Bloomberg terminal alone, the volume of data – both on the content of news and the behavior of readers – has skyrocketed. As a result, analysis of media production and consumption requires ever more sophisticated techniques for identifying the informational value of news and the behavioral patterns of its modern readers.