Earnings articles with more analysis increase trading volume and improve “price discovery at earnings announcements.” The research found that earnings stories that have a high proportion of words similar to those used in a company’s earnings release are less helpful to investors.
The study examined Journal earnings stories of companies in the S&P 500 from 2004 through 2015 and was conducted by Nicholas Guest, a Ph.D. student in accounting.
“Media analysis also enhances investors’ trading decisions by improving their understanding of the implications of firms’ earnings news,” writes Guest, who provided a copy of his research to Talking Biz News.
“In other words, journalists’ analysis efforts provide value to readers, which helps explain the continued production of costly earnings-related analysis amid increasing pressure from low-cost information sources.”
The research is timely for business journalism. The Associated Press recently began producing more than 3,000 earnings stories each quarter using software from a company called Automated Insights.
However, Quant Media founder Max Frumes wrote earlier this month that such software often misses the news in earnings releases.
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