The Media and the Financial Markets: A Review

An increasing stream of literature about the role of the media in finance has been developed in recent years. The development in textual analysis techniques together with the availability of a massive amount of data have created the possibility of going deeper into an analysis of soft information, including newspaper articles and other media-generated content. This paper aims at putting forward knowledge about the media’s role in finance, leveraging on a large variety of research from the field of finance, accounting, management, and economics. A better description of common patterns in the literature and, more importantly, contrasting different empirical results, will shed light on these still unclear phenomena. What is the role of the media in stock pricing? Are the media able to convey relevant and new information to financial markets or do they only exacerbate irrational choices by individual investors who rely on them to be informed? Do the media play a role in the corporate governance framework? Are there any occasions in which the media are notably effective? The goal and the contribution of this paper are to provide a response to these queries by leveraging on existing, but often unconnected, literature.