Stock Market and Mass Thinking

vasa1

Well-known member
#22
Gains from spinning the news
Selective Publicity and Stock Prices

Simply Economics | Manas Chakravarty

More here.

Can the efforts of investor relations (IR) firms affect a company’s stock price?
... public relations firms are able to spin non-earnings announcements more than earnings releases. That’s very plausible, because earnings announcements contain precise numbers that can be seen through by analysts, making them difficult to spin, though not for want of trying.
A higher proportion of CEO pay in stock and option compensation predicts a higher probability of using an IR firm.
... companies prefer to release positive news releases from Monday to Thursday, when investor attention is higher.
... a trading strategy around earnings announcements: Buy companies that do not use IR firms and short companies that use IR firms. The logic is simple—since earnings expectations have already been bid up by the IR firms, stock prices of the companies that use them are likely to fall after earnings are declared, while the ones that don’t use IR firms will not see any such impact.
... suggest investors do not distinguish between media coverage arising from IR influence and media coverage from general newsworthiness, and are surprised when hard information turns out to be worse than expected. Investors, it appears, can be fooled, but not forever.
 
Last edited:
#23
Query

Hi Vasa,
can you please let me know how do you which company uses the media to generate the positive perception in the market?
Of courseno company will tell this openly.. :p
I guess so.....
 

vasa1

Well-known member
#24
I think the author answered that indirectly when he said that "a higher proportion of CEO pay in stock and option compensation predicts a higher probability of using an IR firm".

But, no, I don't have any idea and agree with you that such things won't be publicised.

On a somewhat related point, several companies have an "equity-for-ads/news coverage" deal with one of India's oldest newspapers ;)
 
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