Blankespoor, Elizabeth and deHaan, Ed and Zhu, Christina, Robo-Journalism and Capital Markets (November 7, 2016). Available for download at SSRN: https://ssrn.com/abstract=2872784
“In 2014, the Associated Press (AP) began using algorithms to write media articles about firms’ earnings announcements. These “robo-journalism” articles synthesize information from firms’ press releases, analyst reports, and stock performance, and are widely disseminated by major news outlets a few hours after the earnings release. The articles are available for thousands of firms on a quarterly basis, many of which previously received little or no media attention. We use AP’s staggered implementation of robo-journalism to examine the effects of media synthesis and dissemination, in a setting where the articles are devoid of private information and are largely exogenous to the firm’s earnings news and disclosure choices. We find compelling evidence that automated articles increase firms’ trading volume and liquidity. We find no evidence that the articles improve or impede the speed of price discovery. Our study provides novel evidence on the impact of pure synthesis and dissemination of public information in capital markets, and initial insights on the implications of automated journalism for market efficiency.”