Determinants and consequences of journalists' behavior in financial markets

• Applicant: Professor Dr. Heiko Jacobs
• Subject Area: Accounting and Finance
• Term: since 2021
• Project identifier: Deutsche Forschungsgemeinschaft (DFG) - Project number 459791356

The business media is among the most important and influential information intermediaries in financial markets. It is well documented that the media can affect investor behavior and eventually also price discovery. However, the factors, views, beliefs and potentially also systematic biases which affect financial journalists’ work itself are still largely unexplored. When, why and how are financial securities covered by the media – and what are the economic implications? My proposal, which is divided into three parts, intends to provide new insights into these questions.Sub-project 1 analyzes whether selective information processing affects journalistic reporting. More specifically, difference-in-differences approaches are used to exploit the fact that salient, publicly available shorting positions in German stocks often paint a biased picture of the actual short selling situation.Sub-project 2 intends to evaluate of whether the media acts as a catalyst for price bubbles, as for instance often hypothesized in the work of Nobel laureate Robert Shiller. Among others, journalists’ individual behavior during exceptional price increases in global stock market segments as well as with respect to “Siamese twin” stocks are analyzed.Sub-project 3 deals with the question of whether financial journalists indeed consider systematic risk factors, as proposed in the academic asset pricing literature, to represent risk. To this end, journalists’ textual evaluation of the performance of German investment funds is analyzed. In addition, their attitude towards and perception of such risk factors is elicited in an experiment as well as in a survey.In sum, the three empirical sub-projects aim at shedding new light on journalists’ way of working, thinking and behaving as well as on economic consequences of the journalistic output. Doing so not only helps to enhance our understanding of financial journalists as information intermediaries, but also of the information flow in financial markets.

• DFG Programme: Research Grants