Media as Other Information for Fundamental Valuation

The media is an important information intermediary. We investigate the informational role of
the media by examining whether media content, measured by the sentiment of news articles,
contains information about a firm’s fundamental value beyond that conveyed in earnings,
book value, and analyst forecasts. We show that incorporating media content into Ohlson’s
(1995) residual income model generally improves its ability to predict future residual income,
explain current stock prices, and predict future stock prices. Our results are strengthened when
media coverage is higher and when media sentiment is more dispersed.