Howe School Seminar
Wednesday, December 5, 2012 – ( 2:00 pm to 3:00 pm )
Location: Babbio 202
Co-movement and the News
Travis Box, Ph.D. candidate University of Arizona
I introduce a novel approach for the empirical analysis of assetprice co-movement that relates the inter-firm textual similarity of news reports to their equity return correlation. I find that this measure of news similarity is just as important for predicting future cross-firm co-movement as contemporaneous return correlation. This predictability remains after controlling for industry correlation, size, book-to-market, momentum, and price-decile correlation, index membership, and headquarters location, as well as institutional holding and analyst coverage. These results contribute to the growing literature examining the role of the media in financial markets, and provide empirical support for an alternative description of return co-movement that does not depend on friction-based explanations such as "category," "habitat," or "information diffusion."
Travis Box is a Ph.D. candidate in the Finance Department at the University of Arizona. He also has a M.A. is Economics from the University of Missouri, St. Louis and B.A. in Economics from Webster University. His research interests include portfolio choice, co-movement, investor behavior, textual analysis, financial media, agent-based modeling, and computational finance.