Mass Media Influence On Newspapers

Are investors influenced by mass media when making decisions? To what extent newspapers affect stock choices? Is the influence of mass media just a short-term effect?

The first thing to consider is to properly define mass media, and what is meant by mass media influence. The influence that media have on the public is not considered solely on the information conveyed, but mainly on the coverage that media have, how the information are reported, the difference in style of authors and most importantly the fact that a given information is reported over another. The most important aspect considered is therefore the impact that a certain story about a company, when reported by media, has on the public, and not the degree of importance of reported information.

According to the classical theory mass media do not influence prices, indeed all public information are already embedded in the stock price. This happens because few attentive investors obtain information and their actions are reflected promptly in the prices of the stock in question. The investments of households and small investors, instead are not based on the information embedded in the stock prices but mostly on their past prices, which doesn't make sense, from a

Households do look at what media says in order to invest, the price of a stock is not the only thing that people look at when purchasing or selling a stock. The debate on the efficiency of the market is still very open, but some scholars tried to find evidences of the influence of mass media influence on the financial markets. Among those who discussed the topic there are Klibanoff, Huberman, Engelberg, Parsons and Dougal. The last three being the first to establish a causal effect of media on the market. These, and other scholars, all argue that mass media are responsible for a great deal of the causal reaction between new information and the stock