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Abstract摘要
本研究以美国股市为研究对象，了解美国股市对新闻的过度反应和反应不足。研究结果表明，具有较大影响力的新闻媒体、二级新闻和大公司新闻对股票价格的影响较大，更容易引起股票市场价格的过度反应。原因是投资者更容易相信这类消息。投资者更愿意根据消息做出投资决策，从而在短期内导致股价反应过度。股票价格的过度反应可能在短时间内给投资者带来巨大的回报和巨大的损失。为保护投资者利益，证券市场监管机构和新闻媒体应当对新闻报道进行监测和评价，最大限度地保证新闻报道的真实性、全面性和客观性，对重大事件进行评价。从投资者的角度来看，投资者可以根据结论做出投资决策，获得异常收益。
This research report took the US stock market as a research object to understand the overreaction and underreaction of the US stock market towards news. The research results showed that the news from a news media with great influence, secondary news and news from big companies have greater influence on the stock prices and were more likely to cause an overreaction of the prices of the stock market. The reason was that it was easier for investors to trust these types of news. Investors were more willing to make investment decisions according to the news, thereby resulting in an overreaction of stock prices in a short term. Overreaction of stock prices may bring investors vast rewards and vast losses within a short period of time. To protect the interests of investors, stock market regulatory agencies and news media should monitor and evaluate news coverage to ensure the authenticity, comprehensiveness and objectivity of news, as well as evaluation on major events to a largest extent. From an investor's perspective, investors can be based on the conclusions to make investment decisions to acquire abnormal returns.
Introduction介绍
1970年，尤金·法玛提出了有效市场假说。这一假设强调了信息对股票价格的影响。本研究认为，为了提高证券业务的有效性，根本问题是解决证券价格形成过程中信息披露、信息传递、信息解读和信息反馈等各个方面出现的问题（Dyck、Volchkova和Zingales，2008）。影响股价的因素很多，新闻是影响股价的重要信息来源。然而，值得注意的是，股价对新闻的反应有两种：过度反应和反应不足。过度反应是指投资者对新信息的反应过于强烈而无法采取积极的投资行为，从而导致股价的过度波动。涨跌过大会使股票价格偏离均衡价格。反应不足意味着投资者低估了最近获得的信息，处于保守状态。这个小组对一些信息并不热心，甚至没有反应。考虑到股票市场原本有利于投机的消息，当它被宣布时，市场没有反应，或者反应较少。对过度反应或反应不足现象的研究有助于解释股票市场在信息传播、信息披露等方面的特点和问题，也有助于投资者根据新闻类型做出正确的投资决策。本研究报告以美国股市为研究对象，了解美国股市对新闻的过度反应和反应不足现象，试图解释导致这两种现象的原因，为投资者了解美国股市的特点提供一些建议。
In 1970, Eugene Fama proposed the efficient markets hypothesis. The hypothesis emphasizes the impact of information on stock prices. This study held the opinion that to improve the effectiveness of securities business, the fundamental problem was to solve the problems appearing in all aspects of information disclosure, information transmission, information interpretation and information feedback in the of security price formation process (Dyck, Volchkova & Zingales, 2008). There are a lot of factors affecting stock prices; news is an important source of information affecting share prices. However, it is worth noting that the reaction of stock prices towards news includes two kinds: overreaction and underreaction. Overreaction refers to the phenomenon that investors have too intense response towards new information to take aggressive investment behavior, which causes excessive volatility of stock prices. Rising or falling too much will aggravate stock prices to depart from equilibrium price. Underreaction means that investors underestimate the information recently obtained and are in a conservative state. The group is lukewarm towards some information, and even has no response. Considering the news which is originally good for speculating in the stock market, when it is announced, there is no response from the market, or there is less reaction. Research on overreaction or underreaction phenomenon helps to explain the characteristics and problems of a stock market in information dissemination, information disclosure, which also helps investors to make right investment decisions depending on the types of news. This research report took the US stock market as a research object to understand the overreaction and underreaction phenomena towards news in the US stock market, it tries to explain the reasons leading to these two kinds of phenomena, so as to offer some suggestions for investors to understand the characteristics of the US stock market.
Main points
Impact of news on the US stock market
The US stock market is one of the most mature capital markets with most funds in the world. It is inevitable for the US stock market to separate from influences of news (Mathur & Waheed, 1995). The impact of news on the US stock market is mainly reflected at three levels. Judging from an enterprise’s own point of view, Carvalho, Klagge and Moench (2011) studied the impact of news on stock prices. The authors believed that news is not entirely unbiased, since enterprises often use financial reports or corporate advertising to influence investors. If the corporate earnings information is released, the company's stock price will be positively impacted; if enterprises are facing difficulties or incidents, the corporate management will try to delay the report against them, thereby slowing the negative impact of unfavorable news on the stock prices of the companies. Considering from an industry perspective, Carvalho, Klagge and Moench (2011) analyzed how false news shock acts on the stock price of United Airlines. The research results revealed that the shock had a continuous negative effect on the levels of UAs’ stock price; and the false news shock also negatively affected stock prices of other major airline companies continuously. This indicates that the news not only impacts a particular business, but also affects the industry that the company belongs to. From an investor's perspective, Hirshleifer and Hong (2009) took US investors as an example to confirm that the transfer of news and information can affect beliefs and behaviors of investors in US stock market. It is thought that such impact is highly infectious. The authors’ analysis shows that investors’ access to information includes the conversations between investors, expression of news media, as well as observing the behavior of other investors, and therefore these kinds of information not only result in impact on an investor's investment decisions, but also affects behavior and beliefs of other investors through the investor itself. Carvalho, Klagge and Moench (2011) concluded that in most situation, relevant information, noise appear at the same time and cannot be separated easily. Many investors lack sufficient knowledge and trading skills. When investors trade by using knowledge of false news, it is easy for participants to be inflienced by misleading news .the participants are very easy to be influenced by misleading news. All in all, the impact of news on US stock market price exists objectively, but whether this effect is an overreaction or underreaction of stock prices needs to be further discussed in the following content.
Impact of different media on stock prices
Whether news about a market can be accurately reflected depends on conditions of two aspects. One is that the news can be known by the majority of investors, and the other is investors’ abilities to digest, absorb, and judge a variety of information acquired. As individual investors are at a disadvantage in terms of time, money, expertise, technology and equipment, their abilities to access information are extremely limited. Their ways are relatively simple. The investors are mainly dependent on the media, and individual investors have relatively poor abilities for information processing, judgment and digesting. This group tends to just stare at a variety of information released by news media. Once the media announces a piece of "good" news, individual investors will follow up, causing the rise of stock prices; on the contrary, once a media releases "bad" news, the investors will blindly withdraw investment, resulting in share price decline. In such a case, the news media with a wide range of audiences and high social credibility are often trusted by investors. It is easy for the news released by these media to have an impact on stock prices. Huberman and Regev (2001) mentioned such a case. EntreMed was a small pharmaceutical company listed on the NASDAQ. In December 1997, a magazine named Nature reported that the company developed a new drug for treating cancer. After disclosure of the news, share price of the company rose only slightly. A few months later, The New York Times (NYT) reported the information repeatedly on the front page on May 3, 1998. Thus the company's share price rose sharply, during two trading days, it rose from $ 12.063 to $ 52, and in the following months, it had maintained at a high level (Huberman and Regev, 2001). The report of NYT did not contain any new information, but why EntreMed's stock price has risen sharply? Why the report from Nature failed to achieve the corresponding effect? One possible explanation was that, NYT is a daily newspaper published in New York. NYT is distributed throughout the world and it has considerable influence. It is on behalf of serious publications in the United States. For a long time, it has a good credibility and authority. As what NYT reported often has a high reliability, it tends to be directly chosen as news sources by other newspapers and news agencies in the world. Moreover, compared with Nature, which is a professional magazine, NYT has a wider range of audience. Information released by it can be known by more investors. A wide range of audience and high credibility of NYT also contribute to the overreaction of stock market price towards its news reports. Although Nature is one of the most prestigious scientific journals in the world, its influence is more limited, and therefore there is underreaction of the stock price for the news reported by Nature.#p#分页标题#e#
Primary news and secondary news
News of a stock market can be divided into primary news and secondary news. The primary news refers to the news released by the public media. The secondary news uses collected information from public sources and manipulated information from public news sources. A public media holds a neutral and objective manner towards primary news of an event. Sometimes a public media does not conduct an in-depth analysis on the potential and future impact of the case on share prices. As investors are disadvantaged in gathering relevant information, information analysis and investment techniques, many investors fail to make a proper evaluation on the impact of the incident on the stock market price (Mathur and Waheed, 1995). In this case, investors rarely make aggressive investment decisions, and thus the primary news less reacts on the prices of the stock market. Considering secondary news, especially the secondary news published by some professional financial journals and institutions, such as stock market analysis reports, credit rating reports may analyze the impact of the incident on the stock market. Because these professional bodies and organizations have the skills in information gathering, information analysis that ordinary investors do not have (Mathur and Waheed, 1995), therefore the information provided can often be valued by investors. Investors will be based on the second-hand information to make decisions to buy or sell stocks, resulting in fluctuations in the prices of the stock market in the short term. Lloyd-Davis and Canes’ (1978) studied what secondary news (market analysis) released by a professional financial magazine named? Barron`s affected a stock price, the analysis concluded that the second-hand information could effectively influence the stock value, secondary news could not only bring significant abnormal changes to the prices of a stock market, but also keep this effect maintained in the next 20 days. The research further noted that second-hand information had an economic value for customers, and the impact of primary dissemination of such information on the adjustment of stock prices was limited. All in all, for the same coverage of an event, the influence of primary information on the prices of a stock market is less than second-hand information, a stock price is more likely to overreact to secondary information, and lack response to primary news.
Enterprise size
News from businesses of different sizes affects the share prices differently, the differences between large companies and small companies in terms of news are shown in the following three aspects. First, as large companies are usually engaged in more and more complex activities, the amount of news about big companies is usually larger than the amount of news about small companies. Investors and institutional investors can get more clues from the news to make investment decisions. Second, large companies attract more attention than small companies from a society. The relevant information of large-scale companies often has been reported in time, and the news and information disclosed are more realistic and accurate. Finally, due to social influence and large scales of share capital of large companies, there are more investors who buy their stocks, so investors and investment institutions pay more attention to the news of big companies (Mathur and Waheed, 1995). All in all, news and information of larges companies are more abundant, accurate and timely. Investors and investment institutions are more willing to be on the basis of the news of large companies to make investment decisions. The news released by large companies is easier to stimulate aggressive investment behavior of investors, resulting in overreaction of the prices of a stock market. Huth and Maris (1992) confirmed the above opinions to certain extent. Huth and Maris (1992) studied and found that the information obtained from the HOTS column could generate statistically significant stock price movements. The size of a company was proved to be important for comments in the column. The news from a big company would have a strong influence on stock prices and the news from a small company would affect the prices less.
Discussion
Overreaction of share prices largely depends on investors’ aggressive investment decisions and behavior in a short term, and most investors are inadequate in investment skills and the access to information, so news becomes an important basis for them in making investment decisions. Whether the scope of the spread of a piece of news is broad, whether the media has large influence ,whether the quality of information contained by the news is high and whether the news is accurate, truthful, timely are important factors determining. Whether investors take an aggressive investment decision is also the key factors leading to the overreaction and underreaction of share prices. Comparatively speaking, the news from the news media with greater influence, secondary news, and the news from big companies have greater impact on the prices of a stock market, which is more likely to cause an overreaction of stock prices, because these three types of news have large influence, a higher quality of information, the news content is more accurate, realistic and timely.
Overreaction of stock prices may not only bring investors vast rewards within a short period of time, but it may also bring vast losses. Therefore, to protect the interests of investors,stock market regulatory agencies and news media should monitor and evaluate news coverage to ensure the authenticity, comprehensiveness and objectivity of news, as well as evaluation on major events to the largest extent. From an investor's perspective, overreaction can bring abnormal returns in a short time. Therefore, when investors make investment decisions based on news, the observation and analysis of those news from the news media with greater influence, secondary news, and news from big companies should be paid a special attention.
Conclusion
This research report took the US stock market as a research object to understand the overreaction and underreaction of the US stock market towards news. The research results showed that the news from a news media with great influence, secondary news and news from big companies have greater influence on the stock prices, which were more likely to cause an overreaction of the prices of the stock market. The reason is that these types of news are easier to be trusted by investors, investors are more willing to make investment decisions according to the news, thereby resulting in an overreaction of stock prices in a short term. On the contrary, the news form a media with less influence, primary news, and news from relatively small companies have less impact on the stock prices, because the news is relatively more difficult to get the trust of the majority of investors, the investors have relatively small willingness to make investment decisions according to the news, leading to underreaction of the stock prices towards the news. Relevant stock market regulatory agencies and news organizations can be based on the above-mentioned research results to supervise the authenticity, objectivity and comprehensiveness of the news to protect the interests of investors, and related investors can make investment decisions according to these conclusions, in order to obtain abnormal returns.
This report was from three aspects: the influence of a media, the sources of news and sizes of companies to analyze the impact of news on the prices of the US stock market. In practice, there are many other factors which also affect the reaction of the stock prices towards news, such as types of investors, characteristics of an industry that a stock belongs to, as well as different market cycles, and so on. Limited by the length of the report, this research failed to carry out an in-depth discussion on these factors. How these factors affect the reaction of the stock prices towards news will be a valuable research topic in further researches.
References
Carvalho, C., Klagge, N. & Moench, E. (2011). The Persistent Effects of a False News Shock. Retrieved from: http://www.newyorkfed.org/research/staff_reports/sr374.pdf
Dyck, A. Volchkova, N. & Zingales, L. (2008). The corporate governance role of the media: Evidence from Russia. Retrieved from: http://onlinelibrary.wiley.com.
Hirshleifer, D. & Teoh, Siew Hong. (2009). Handbook of financial markets: dynamics and evolution. Thought and Behavior Contagion in Capital Markets, 289-325.
Huberman, G. & Regev, T. (2001). Contagious speculation and a care for cancer: A non-event that made stock prices soar. Journal of Finance,56, 387-396.
Huth, W. L. and Maris, B. A. (1992). Large and small firm stock price response to “heard on the street. Journal of Accounting, Auditing, and Finance, 7, 27-47.
Lloyd-Davis, P. & Canes, M. (1978). Stock prices and publication of second-hand information. Journal of Business,51,43-56.
Mathur, I. & Waheed, A. (1995). Stock price reactions to securities recommended in business week’s inside Wall Street. The Financial Review, 30, 583-604.
Mullainathan, S. & Shleifer, A. (2005). The market for news. The American Economic Review. 95(4), 1031-1053.
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