The Impact of News on Stock Returns: An Analysis of the US Film Industry

The ways how some market events – particularly, news releases – influence stock performance of companies in different market segments have been widely discussed in financial literature. Although there has been a number of investigations into the impact of news on company`s stock returns in film industry, previous studies have mostly focused on particular types of news or box office revenues. The present research aims to conduct a more comprehensive analysis on the relationship between different types of positive and negative news, stock returns, trade volumes, and risk in the USA film industry. In this paper, in order to examine stock returns, Event Study (ES) analysis through Cumulative Abnormal Return (CAR) model is applied. Its derivative – Cumulative Abnormal Volume (CAV) model – is used for trade volumes, and EGARCH model helps to reveal the asymmetric reaction of volatility. We consider the dataset of about 393 news items for 10 major US media companies for the period from November 2014 to February 2018. The results of this study suggest that media stocks are more sensitive to negative events, which is demonstrated for returns and supported by volumes and volatility reaction. This study may both extend a line of research in film industry or similar market segments and provide a benchmark for private and corporate investors.