The media has a decent effect on daily trading. Studies have shown local media coverage increases local trading by an estimated 75% on average. While fundamental changes in a company will move its stock with or without media coverage, the media plays an important role in disseminating information to a wider audience and can influence localized trading patterns based on geographic proximity and relevance of coverage.

1. How does the Media cover
Business and Economics?
A IN-DEPTH ANALYSIS
BY RAMY SIMPSON

2. Lesson Module One
THE MEDIA’S EFFECT ON THE STOCK
MARKET AND HOW THE MEDIA COVERS THE
STOCK MARKET

3. Learning Objectives
 The correlation between media stories and stock
market reactions.
 How media outlets choose which business stories to
cover.
 What makes local media important?
 The importance, relevance and geographic proximity
of news in relation to local media.

4. The correlation between media stories and stock
market reactions
 With or without media attention, when firm
fundamentals change, investors respond.
 The media just makes knowledgeable facts known to
a broader audience.

5. Example of Earnings Per Share
Media’s
Influence
Third Quarter
In 2007 Detroit News
ran an article about how
local firm DTE Energy
had third quarter gains
that surpassed their
previous years revenue
and were now worth Fourth Quarter Earnings Per
$1.16 per share. In the
fourth quarter DTE had Share
more gains and were
worth $1.56 per share,
Detroit News did not
report these gains. As it
turned out, overall Previous Year
trading was 21% higher
the first three days after
the third quarter then the
fourth quarter, even
though the fourth quarter 0 1 2
gains were higher.

6. The correlation between media stories and stock
market reactions
- Another Example of Media’s Influence:
 Studies have shown if local media reports a company’s
earnings on a specific day, local trading increases on that
specific day.
 If a local media outlet in Phoenix reports on a companies
earnings or losses on a Wednesday, an increased amount
of trading in Phoenix will occur on that Wednesday. If
Seattle reports the same news a day later on Thursday, an
increased amount of trading in Seattle will occur on that
Thursday.

7. The correlation between media stories and stock
market reactions
 A reason why news might get to a city a day later is
poor weather. In today’s internet era, news will find
ways to arrive in every city at the same time.
However in the pre-internet era, specifically the
90’s, news came from local papers, and if weather
prevented newspapers from getting door to
door, news would be delayed for many people.

8. How media outlets choose
which business stories to cover
FACTORS:
LOCAL MEDIA
IMPORTANCE
RELEVANCE
GEOGRAPHIC PROXIMITY

9. How media outlets choose which business stories
to cover
 Obviously if a report on a business deserves National
attention, it will be a top priority for all media
outlets. It is both important and relevant to people
across the nation. Media outlets will cover these
stories, such as scandals, the same way. They will
explain what happened and provide their own biases.
 However what really differentiates media outlets
across the country is how they cover business news
that isn’t worth National attention. How do they
decide what business news to report on?

10. How media outlets choose which business stories
to cover
 What seems to be apparent from studies is that the
media in a town is more likely to report business
news relevant to that town. Geographic proximity is
important when it comes to news.
 For example, the Atlanta Journal Constitution is
more likely to report updates from a business in
Atlanta than the Pittsburg Post Gazette is.

11. How media outlets choose which business stories
to cover
 This has an effect on local trading on the Stock
Market.
 Local media coverage increases local trading by an
estimated 75% in the typical market.

12. Quiz
What kind of effect do you think the Media has on
daily trading?
 No effect
 Minimal effect
 Decent effect
 Huge effect