Refine
Year of publication
- 2015 (3) (remove)
Document Type
- Working Paper (3)
Language
- English (3)
Has Fulltext
- yes (3)
Is part of the Bibliography
- no (3)
Keywords
- Dynamic Capabilities (1)
- Experiment (1)
- Framing Effect (1)
- Investment Decisions (1)
- Investor Sentiment (1)
- News (1)
- Price Expectations (1)
- Resource Acquisition (1)
- Tone (1)
- Venture Capital (1)
Institute
- Center for Financial Studies (CFS) (3) (remove)
Euro crash risk
(2015)
We investigate the effect of the tone of news on investor stock price expectations and beliefs. In an experimental study we ask subjects to estimate a future stock price for twelve real listed companies. As additional information we provide them with historical stock prices and extracts from real newspaper articles. We propose a way to manipulate the tone of news extracts without distorting its content. Subjects in different treatment groups read news items that are written either in positive or negative tone for each stock. We find that subjects tend to predict a significantly higher (lower) return for stocks after reading positive (negative) tone news. The effect is especially pronounced for stocks with poor past performance. Subjects are more likely to be optimistic (pessimistic) about the economy and to buy (sell) stocks after reading positive (negative) than negative (positive) tone news. Our results show that the news media might affect not only how investors perceive information, but also what they do in response to it.
A premise of the capabilities perspective in strategy is that firm-specific capabilities allow some firms to be unusually adept at exploiting growth opportunities. Since few firms have the capacity to internally generate the quantity or variety of strategic resources needed to exploit growth opportunities, the ability to externally acquire complementary resources is critical to the acquisition of competitive advantage. However, the external sourcing of resources exposes the firm’s strategic resources to risks of expropriation. We argue this threat gives capable firms incentive to use internally generated strategic resources to pursue growth opportunities before turning to external sources. A pecking order theory of strategic resource deployment is implied. Data from a 22-year sample of cross-border investment partnership decisions made by U.S.-based venture capital firms lend support to our theory.