Handbook of Media Economics, vol 1B

fertile ground for further study. First, anecdotal studies suggest the impact of media on

asset prices could be enormous, with the publication of single articles causing prices to rise

or fall by factors of three to six. But the large-scale evidence from studies using instru-

ments for exogenous changes in media reporting reveals impacts that are smaller by an

order of magnitude. One can reconcile these facts by arguing either the anecdotes are

unusual or the instruments are weak. Future research should determine the merits of

these explanations.

Second, an especially important and unsettling finding in the literature is the weak

link between information arrival and price movement. Part of the explanation seems

to be that market prices underreact