New Research: The Effect of Print Media Tone on the Equity Market in Israel
- The intensity of the prominence given to articles dealing with the equity market in the print media has an impact on that market, mainly if the articles are negative. The impact is noticeable in equity yields and in volatility.
- The media has a stronger effect on what happens in the equity market on days of sharp changes in equity prices, and mainly on days of sharp declines.
- There is twice is much coverage of price declines in the written media as there is of price increases. The lack of symmetry is even more extreme in the general print media than it is in financial print media.
A study conducted by Mosi Rosenboim, Yossi Saadon, and Ben Z. Schreiber examines the effect of the print media in Israel on the equity market between 2011 and 2017. The study included all articles published in the print media in Israel that dealt with the equity market as a whole. The articles were examined by “Yifat Media Research”, and classified by their sentiment toward the Israeli equity market (negative, positive and neutral) and by the type of newspaper: general papers (“Yediot Aharonot”, “Yisrael Hayom”, and “Ma’ariv”) or financial newspapers (“Globes”, “TheMarker”, and “Calcalist”). In addition, the “value” of each article was measured by the cost of purchasing parallel advertising in that newspaper. This method of measurement takes into account the size of the article, the page on which it is published, the newspaper, and other things, so that the pricing basically reflects the extent of the article’s exposure to the readership. Among all the articles that were analyzed, articles that devoted at least 50 percent of their area to the equity market were selected. In total, about 19,200 articles (dealing with the equity market, including specific equities) were analyzed, of which 6,456 dealt with the equity market in general and answered the criteria that were set for this study. 2,749 articles were found to have a positive sentiment, 2,393 were found to have a negative sentiment, and 1,314 were found to be neutral.
In view of the immediate availability of the information on websites, social networks and electronic media, the vast majority of print media dealing with the equity market (and that meets the criteria set for selecting the articles) does not provide new information on the equity market that market actors did not know before the newspapers were distributed. As such, in most cases, the article’s publication is not “news” for the equity market. In contrast, the size and location of the article (and therefore the extent of its exposure), which are chosen by the newspaper’s editors in accordance with the economic event described by the article and other editorial considerations, changes and can create sentiment in relation to the equity market. Using a separate statistical methodology, the researchers neutralized the part of the article’s value that could be attributed to new information about a financial event. Thus, the analysis in the study focuses only on the effect of the coverage volume (which is reflected in the size of the article, its location in the newspaper, the newspaper in which it was published, and so forth) on variables in the equity market, including on daily returns (the difference between the closing price each day and the closing price on the previous day), the overnight returns (the difference between the opening price each day and the closing price on the previous day), and the intraday returns (the difference between the closing price and the opening price on the same day). The main findings of the study are that:
(1) Coverage volume has a statistically significant impact on overnight and daily equity returns, but not on intraday returns. Positive coverage contributes to positive daily and overnight returns, and negative coverage contributes to negative returns.
(2) Coverage volume has a statistically significant impact on volatility in the equity market. Positive coverage leads to lower volatility and negative coverage leads to increased volatility (intraday and daily).
(3) The media has a stronger impact on events in the equity market on days when there are sharp changes in equity prices, and mainly on days when there are sharp declines. In particular, negative coverage has a stronger effect on equity market variables than positive coverage does, which apparently contributes to additional pressure when there are crises in the market.
(4) The volume of coverage of economic events is not symmetrical. Declines in equity indices will lead to greater coverage volumes than increases of the same amounts. The asymmetry in the general media is more significant than in the financial media. The asymmetry in coverage of economic and general events is also found in studies in other countries, but this study (for the first time) measures the extent of symmetry in coverage volume as reflected in the size of the article and in the newspaper in which it is printed.
The issue of the media’s impact on the capital markets has been examined in studies abroad. However, this study, in contrast to others, is unique in that it examines not only the publication of an article, but also gives weight to how prominent it is in the newspaper and to the newspaper’s distribution, thereby distilling the analysis of the media’s impact and the atmosphere it creates in the capital market.
 Head of the Guilford Glazer Faculty of Business and Management, Ben-Gurion University of the Negev.
 Bank of Israel Research Department.
 Bank of Israel Information and Statistics Department and Bar-Ilan University.
 To the best of the authors’ knowledge, there has not been a similar study conducted on the Israeli equity market.