Study: AP’s automated earnings stories increase trading

Researchers from Stanford University and the University of Washington have found compelling evidence that earnings stories written using software and published by the Associated Press increase company’s trading volume and liquidity.

Francesco Marconi of the AP writes, “This year, we collaborated with researchers from Stanford University and the University of Washington to evaluate the role of automated journalism in capital markets. The analysis conducted by professors Elizabeth Blankespoor and Ed deHaan, along with PhD student Christina Zhu, found compelling evidence that automated articles increase firms’ trading volume and liquidity.

“‘After the articles are published, we see an increase in trading volume that persists three to four days after the story comes out,’ explained deHaan, an accounting professor at the University of Washington.

“The media contribute to more informed and efficient financial markets by conducting analysis, uncovering corruption and holding executives accountable. Beyond that, news organizations relay facts from public accounting reports to the public through a vast distribution network.

“This study found a positive effect between the public dissemination of objective information and market efficiency, a major discovery for the implications of automated journalism on capital markets.

“‘It’s an exciting first step in what is possible with automation technology,’ Blankespoor said. ‘It’s not about displacing journalists from their jobs — it’s about providing coverage for firms that were not previously in the news.'”

Read more here.