The Handbook of News Analytics in Finance

4.9 SIZE DOES MATTER

Businesses, big and small, are required to disclose material non-public information promptly. The news disclosure process is regulated by the SEC. Therefore, it has been assumed that if the process is followed all businesses receive the same treatment.

However, companies trading on smaller exchanges receive more scrutiny and attention in the way the news is handled. As small businesses do not benefit from the big public relation budgets that typify big businesses, stock moves may have an uneven cycle. Businesses that benefit from big budgets are capable of maintaining a constant stream of news—therefore, stock moves may have a more lasting trend than those of small businesses. For instance, the well-known public relation practice of “crisis management” is seen as normal business procedure for a big and established business.

On the other hand, the SEC often gives the interpretation of “stock price touting” when news is released and “managed” by smaller businesses while these types of comments are very rare for larger businesses.

Big public relations and marketing budgets have a significant and sustainable advantage in the stock market. There are many examples in the industry, but one of the most recent and famous is the introduction of Apple's iPhone. Apple hired top-notch professional marketing and public relations firms and spent hundreds of millions of dollars marketing the new product as far as six months ahead of its actual release date. Naturally, Apple's ...