"Separating Media Exposure from News Content Effects on Stocks"
Winner of Best Paper Award in Accounting, Economics and Finance, LBS Trans-Atlantic Doctoral Conference, 2008

How does media exposure affect the process of price adjustment to new information? I construct a dollar value measure of an event's media exposure, equal to the sum of all relevent articles, weighted by the price of their adjacent advertising space. For one detailed case, this measure is 0.57 correlated with daily volume and 0.30 with abnormal returns. Using a large sample of new drug approvals by the FDA, I test the hypothesis that post-event price drift is decreasing in the initial media exposure of positive news. I find that market participants underreact to low media exposure approvals and overreact to high ones. An extra article on the front page of The Wall Street Journal on approval day accounts for a 1.07 percentage points lower abnormal return over the five trading days following the average approval. These results suggest the existence of an optimal level of media exposure for market efficiency.

TA for Behavioral Finance 35121 (Spring 2008)
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TA for Corporate Finance 35200 (Winter 2008)