The Piton Investment Team monitors media reports on events and trends that can have an impact on the portfolios of Piton clients, but they are also aware that headlines are designed to attract readers, so it is critical to seek out original or more complete data, even as sometimes the headlines themselves sway investors, and hence the markets. This week the team looked at some research that helped quantify the sense that negative reports about the market and the economy can seem to receive a disproportionate amount of attention.
A study published in March of this year (see link below) examines a question: which market days receive the most coverage? Researchers looked at reporting on the Dow Jones index by leading U.S. online news outlets from 2017 through 2024. Over that period, the Dow rose at an annualized rate of 10.1%. But when the researchers gave each day’s Dow move more weight if it received more news coverage, the average news-weighted daily move was negative. In effect, the market an investor encountered through frequently covered days looked worse than the market’s actual path. Think of a simple example: if the market rises modestly on several quiet days, then falls sharply on one heavily covered day, an investor reading the headlines may remember the decline far more clearly. The study finds this pattern in U.S. coverage. A key distinction then is that this media negative representation is not a return someone earned by investing in the Dow. It describes the average daily market move after the researchers’ weighted days by how much coverage they received. The practical lesson is to take a troubling headline seriously, then check it against the portfolio’s investment horizon and the market’s full record before acting.
The off-balanced way someone might recall such coverage may be partially explained by the principle of “loss aversion.” Kahneman and Tversky’s work (link below) on loss aversion helps explain why a market decline can feel more powerful than a comparable gain. Investors tend to give losses greater emotional weight. That does not make the loss imaginary, but it can make a bad day feel more important than the many ordinary days around it. Especially in combination with, or given extra momentum by, the lopsided media coverage, this emotional trajectory helps explain why investors can feel surrounded by bad market news even during a period of positive returns.
The Piton Investment Team, then, works to be aware of media coverage, but supplement it with further data, so that they be armed with the best information when they make decisions about guiding the holdings in the portfolios of Piton clients.
Ciccone, Antonio, and Felix Rusche. 2026. “Stock Market Performance in the Media: Reporting Big News, Missing the Big Picture?” ECONtribute Discussion Paper No. 395. https://www.vwl.uni-mannheim.de/media/Lehrstuehle/vwl/Ciccone/Stock_Market_Performance_in_the_Media_10March2026.pdf
Kahneman, Daniel, and Amos Tversky. 1979, “Prospect Theory: An Analysis of Decision under Risk.” Econometrica 47.2: 263-292. https://web.mit.edu/curhan/www/docs/Articles/15341_Readings/Behavioral_Decision_Theory/Kahneman_Tversky_1979_Prospect_theory.pdf
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