Does media coverage matter for the performance of technical trading strategies? Evidence from Taiwan

• Autor(a) principal: Wu, Yao-Tsung
• Data de Publicação: 2024
• Outros Autores: Liu, Chien-Hung, Lin, Kuo-Hao, Ke, Dun-Yao
• Tipo de documento: Artigo
• Idioma: eng
• Título da fonte: Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)
• Texto Completo: http://hdl.handle.net/10400.5/29956
• topic: Media Coverage; Moving average; Investor attention; Price continuation

Motivated by the idea that “coverage by mass media can play a role in alleviating information problems even if it does not break genuine news” (Fang and Peress, 2009: 2050), this study is first to relate media coverage to performing moving av erage (MA) technical trading in the cross-section. Testing a sample of Taiwanese listed stocks over the period 1996 to 2021, we find that the MA strategy’s profitabil ity is high (low) for portfolios grouped by stocks with low (high) media coverage. For the “low-media-coverage” portfolio, the MA strategy earns about 24.75% per annum, adjusting for the Fama–French five risk factors. The MA’s superior perfor mance on the “low-media-coverage” portfolio remains after controlling for market liquidity and market sentiment. We also find that the low media effect on the MA strategy’s profitability is more pronounced during recessionary periods. Our overall results are supported by the hypothesis that a low level of media coverage induces investor inattention and slows information diffusion, which amplifies the investors’ under reaction bias and stronger price continuation, being associated with a higher MA strategy’s profitability