Media’s effect on the Norwegian share. A study on trading volume and intraday price spread of the Norwegian Air Shuttle ASA share

Abstract

In this paper, I study the relationship between media intensity and trading volume and intraday price spread for the share of the Norwegian airline Norwegian Air Shuttle ASA from January 2010 to June 2016. The company Norwegian was chosen as it is a company that is heavily covered by the Norwegian press, and the investor profile is a good mixture of institutional and non-institutional investors, suitable for my study. I use an exploratory method to arrive at the final models. My data consists of non-stationary time series and I look at various ways of making them stationary, as well as various combinations of explanatory variables. A large portion of the study is devoted to model testing and finding the news related variables that best explain the variation in trading volume and intraday price spread. I perform correlation analysis, as well as linear regressions, and find that the investors are indeed attention-driven, i.e. they trade when the company is mentioned in the news. Rational investors would allocate higher importance to the financial press than the tabloids, and indications of this is found in my study. However, the novelty of my study is that I look at the ratios between financial- and non-financial press articles, and my models show indications that the investors in Norwegian have difficulties screening out the relevant articles when the financial press is drowning in a high general media intensity. My conclusions are robust to the assumptions behind linear regression on time series data, but must however be viewed with some caution due to lack of details in the news data, and the potential issue of reversed causation.