Chapter 18. The Role of Media in Finance

This chapter reviews and synthesizes a rapidly growing subfield that analyzes the relation between media and financial markets. Research in this area identifies novel data sources, such as newspaper articles, Internet search queries, and posts on social networks, and employs inventive empirical methods, notably textual analysis, to quantify the rich information environment in modern financial markets. Such data and methods enable powerful tests of theories and have the potential to address longstanding puzzles in finance, such as why trading volume and stock price volatility are so high.