The Power of Attention : The Positive Effect of Negative Media Exposure

The media is acknowledged as an important factor affecting stock performance, by either revealing new information or influencing the market sentiment. We probe into the attention effect through which negative media exposure can enhance investors’ awareness of stocks, and hence increase stock returns. Using data covering 4,194 listed firms from 2011-2021, we find that negative media exposure increase stock returns by drawing attention to the relevant firms followed by a reversion to the fundamentals. This effect is more significant on unknown firms than on well-known firms. Our study locates a new factor that could be non-negligible in asset pricing