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Headline Effect

What is 'Headline Effect'

The effect that negative news in the popular press has on a corporation or an economy. Whether it is justified or not, the investing public's reaction to various headlines can be very dramatic. Many economists believe that negative news headlines make consumers more reluctant to spend money.

Explaining 'Headline Effect'

An example of a headline effect is the media's extensive coverage of the impact of rising gas prices on consumers. Some economists believe that the more attention that is paid to small increases in the price of gasoline, the more likely it is that consumers will be more cautious about spending their discretionary dollars. The headline effect can be regarded as the difference between rationally justifiable decreases in discretionary spending and those that occur as the result of a newsworthy event.


Further Reading


Stock price reaction to news and no-news: drift and reversal after headlines
www.sciencedirect.com [PDF]
… theories of investor behavior and how they relate to other findings concerning the effect of information … all sample stocks, news stocks are selected from among those with at least one headline in the given month, and no-news stocks are drawn from those with no headlines …

Opportunistic disclosure in press release headlinesOpportunistic disclosure in press release headlines
www.tandfonline.com [PDF]
… theories of investor behavior and how they relate to other findings concerning the effect of information … all sample stocks, news stocks are selected from among those with at least one headline in the given month, and no-news stocks are drawn from those with no headlines …

Are oil price news headlines statistically and economically significant for investors?Are oil price news headlines statistically and economically significant for investors?
www.tandfonline.com [PDF]
… theories of investor behavior and how they relate to other findings concerning the effect of information … all sample stocks, news stocks are selected from among those with at least one headline in the given month, and no-news stocks are drawn from those with no headlines …

Analysis of the effect of Headline News in financial market through text categorisationAnalysis of the effect of Headline News in financial market through text categorisation
www.inderscienceonline.com [PDF]
… theories of investor behavior and how they relate to other findings concerning the effect of information … all sample stocks, news stocks are selected from among those with at least one headline in the given month, and no-news stocks are drawn from those with no headlines …

Public information arrival and volatility persistence in financial marketsPublic information arrival and volatility persistence in financial markets
www.tandfonline.com [PDF]
… theories of investor behavior and how they relate to other findings concerning the effect of information … all sample stocks, news stocks are selected from among those with at least one headline in the given month, and no-news stocks are drawn from those with no headlines …

Headline salience, managerial opportunism, and over-and underreactions to earningsHeadline salience, managerial opportunism, and over-and underreactions to earnings
meridian.allenpress.com [PDF]
… theories of investor behavior and how they relate to other findings concerning the effect of information … all sample stocks, news stocks are selected from among those with at least one headline in the given month, and no-news stocks are drawn from those with no headlines …

Catering to investors through security design: Headline rate and complexityCatering to investors through security design: Headline rate and complexity
academic.oup.com [PDF]
… theories of investor behavior and how they relate to other findings concerning the effect of information … all sample stocks, news stocks are selected from among those with at least one headline in the given month, and no-news stocks are drawn from those with no headlines …

The effect of macroeconomic news on stock returns: New evidence from newspaper coverageThe effect of macroeconomic news on stock returns: New evidence from newspaper coverage
www.sciencedirect.com [PDF]
… theories of investor behavior and how they relate to other findings concerning the effect of information … all sample stocks, news stocks are selected from among those with at least one headline in the given month, and no-news stocks are drawn from those with no headlines …



Q&A About Headline Effect


Does India focus on headline or core Inflation?

India focuses on headline Inflation.

What is headline inflation?

Headline inflation is a measure of the total inflation within an economy, including commodities such as food and energy prices (e.g., oil and gas), which tend to be volatile and prone to inflationary spikes. On the other hand, core inflation (also non-food-manufacturing or underlying inflation) is calculated from a consumer price index minus the volatile food and energy components.

Why do economists believe that negative news headlines make consumers more reluctant to spend money?

Because of the media's extensive coverage of rising gas prices, it causes consumers to be more cautious about spending their discretionary dollars.

What is a headline effect?

A headline effect is the effect that negative news in the popular press has on a corporation or an economy.

Which central banks have mandates that spell out their goals in terms of headline inflation?

The European Central Bank and the Bank of England have mandates that spell out their goals in terms of headline inflation.

How does negative news affect corporations and economies?

Negative news can cause consumers to be reluctant to spend money.

What are some examples of headline effects?

The media's extensive coverage of rising gas prices and other economic issues such as interest rates can have an impact on consumer spending habits.

How can headline inflation not present an accurate picture of an economy's trend?

Sector-specific inflationary spikes are unlikely to persist.