A study from two business school professors concludes that CEO interviews on business news network CNBC rarely result in any news being disclosed.
Kristina Peterson of The Wall Street Journal writes, “A study that culled from almost 7,000 interviews with chief executives on CNBC over nearly a decade found a recurring pattern: the stock surged on the day the company’s head gave an interview to the business news cable television channel, then dropped right back down over the next 10 trading days.
“The study conducted by University of Kansas School of Business assistant professor Felix Meschke and Nanyang Business School professor Young Han Kim focused on CNBC interviews with chief executives because they wanted to study the media’s effect on stocks without actual, pesky news getting in the way. Given the legal restraints around what CEOs can say without getting sued, their CNBC interviews from 1997 to 2006 turned out to be a vast goldmine, Meschke said in an interview.
“‘They are a great laboratory experiment of something that looks like a news event but doesn’t actually disseminate new information,’ he said. ‘We have something that’s almost pure media attention and really not much substance.’
“CNBC declined to comment.
“While some have speculated that the media on its own can contribute to financial bubbles, Meschke and Kim largely found otherwise in their working paper, recently posted on the Social Science Research Network. On days when a chief executive was interviewed and the company had no other significant event, its stock price did tend to jump, as buying climbed among individual investors, as measured by a trade size between $1 and $5,000. But with the exception of companies with little analyst coverage, the stock price then generally reversed over the next 10 trading sessions.”
