Newspaper headlines as contrarian indicators of share price performance for companies listed on the Johannesburg Stock Exchange

Abstract

Much has been written, by academics, about media coverage as being contrarian indicators i.e. media headlines have an impact on the share price performance of featured companies. The objective of this study was to investigate if this phenomenon was true for listed South African Companies. Thus the study determined if newspapers were effective contrarian indicators for companies listed in the Johannesburg Stock Exchange (JSE). This determination was through a recognised research method and statistical analysis. The study analysed 257 Business Day headlines, featuring JSE listed companies. The study then assessed share price performance for the period 120 days before and 120 days after the headline announcement. The study found that press announcements do have an impact on the share price performance of JSE listed companies and that the impact was significantly higher than those reported in the developed capital markets. The study further determined that positive headlines lead to positive company share price performance; and that negative headlines do not necessary lead to a negative share price performance. The study also found that the impact of these press announcements is influenced by the company’s market capitalisation and sector. It was shown that companies with a large market capitalisation experienced significant impact on share price performance compared to companies with a small market capitalisation.