Wording in Press Affects Investor Expectations

A recent issue of the Journal of Economic Behavior & Organization offers insights as to how wording in the financial press affects investor expectations.

Researchers conducted a study asking participants to estimate the future stock price for twelve listed (unnamed) companies after providing information about historical stock prices as well as excerpts from actual newspaper articles from the prior month. The study participants were split into two groups depending on whether the media coverage was positive or negative. The positive news was “accentuated with emphasizer and amplifier words, while the negative (positive) news were attenuated with downtoners.” The factual information presented was identical for both groups.

Findings showed that study participants were more likely to expect better share performance, be generally more optimistic about the economy, and perceive markets as less risky after “reading news that emphasized positive (negative) and attenuated negative (positive) content.”