The CNBC Effect

Has your CEO been interviewed on CNBC lately?  Do you lie awake at night wondering how a potential media interview might affect your stock price?  Will it cause the stock to go up?  Might it cause the stock to go down? 

The good news is we now have some data that seems to support a significant trend.  In a paper published on the Social Science Research Network, Andy Kim and Felix Meschke share their findings on whether media attention systemically affects stock prices.  After analyzing trade data around almost 7,000 CEO interviews on CNBC, they can affirm that putting your boss on the news show will indeed cause your stock to pop.  At least in the short term(i.e. the remainder of the trading day).  In the long term (about 10 trading days), your stock is likely to give back all of the gains and then some.  The researchers also note that an appearance by your CEO is likely to draw short sellers into the stock, attracted less by what is being said in the interview and more by the predictable pattern of trading surrounding it. 

So the next time your CEO wants to go on CNBC, you can predict how the stock will behave, the increase in retail volume, the increase in short sellers, the pop and the fall in price and look really smart in front of your peers.  Or you can just start an office pool around how the interview will affect the stock price and act very surprised when you win.  If you choose the latter route, you should probably send a thank you to Andy and Felix.