CEO Interviews on CNBC

November 5, 2013 Leave a comment

CEO Interviews on CNBC

Y. Han (Andy) Kim Nanyang Technological University (NTU)

Felix Meschke University of Kansas – Finance Area
October 9, 2013

Abstract: 
We investigate whether media attention systematically affects stock prices through the trading of individual investors by exploiting the substantial discrepancy between perceived and actual information content of 6,937 CEO interviews on CNBC. The average cumulative abnormal stock return over the [-2, 0] trading day window is 1.62%, yet prices exhibit strong reversion of 1.08% over the following ten trading days. The magnitude of price response is positively correlated with the viewership as well as the language tone of the CEO. We find that individual investors are net buyers on the interview days, and that they keep on buying if the interview was both carried out by attractive anchorwoman and was watched by more male viewers. The price reversal is attributable to abnormal short-selling volume on interview day. Moreover, we find that the price run-up before the interviews is largely driven by individual investors that are excited even at the pre-announcement of the interview. We also find evidence of asymmetric attention cascade coming from CNBC interview upon the tone of media coverage of the firm, tilted towards the negative.

Stocks Go up More When CEOs Interviewed By Anchorwomen [STUDY]

by ValueWalk StaffNovember 4, 2013

Media reporting may impact stock prices beyond the dissemination of new information. According to the visibility hypothesis, media attention alone can permanently increase a firm’s value by broadening its investor base (Merton, 1987; Miller, 1977). Huberman and Regev (2001) analyze the puzzling case of a New York Times article, which did not contain any new facts but caused a dramatic rise in the stock price of interviews a small biotech company. They attribute EntreMed Inc (NASDAQ:ENMD)’s astounding market reaction to the article’s prominent position on the front page and to its optimistic tone and content that enthusiastic public attention can move stock prices away from fundamental values, possibly contributing to the formation of asset pricing bubbles.

Any empirical study that investigates the causal impact of media attention upon stock prices has to overcome three obstacles. First, it should move beyond anecdotal evidence and examine whether media attention systematically affects stock prices. Second, it has to separate attention from information effects. Finally, it should delineate the mechanism by which attention affects stock prices to assess whether media-generated attention indeed distorts security prices
(Engelberg and Parsons, 2011).

We believe that we can overcome these three obstacles by studying market reactions to almost 7,000 CEO interviews that were broadcast on the cable television channel CNBC between 1997 and 2006. The large number of interviews allows us to investigate whether media attention systematically affect stock prices. We can separate attention from information effects in a similar manner to Huberman and Regev (2001) since these interviews share essential characteristics with the article about EntreMed Inc (NASDAQ:ENMD): The article constituted a burst of optimism released to a large audience on the front page of the New York Times, which was very suggestive of a genuine news event, distracting from its low actual information content. Similarly, CEO interviews on CNBC are broadcast to a large audience, CEOs have strong incentives to be very optimistic about their companies, and their mere appearance on television is suggestive of a genuine news event.

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Unknown's avatarAbout bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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