Friday, September 14, 2007

Media sentiment and share/stock prices

If a mechanism for accurately correlating media sentiment with share and stock prices could be formulated then you can safely say that this sector of research would be many times larger and I would drive something other than a middle of the road family saloon! But just occasionally comparing the two can make for an interesting insight into whats really going on.

This morning the major UK corparate news has regarded Northern Rock, who have been somewhat unwilling dragged into the debacle, and fast becoming a crisis, that is the sub-prime credit crunch. The graph above sets out a measure of the volume of UK press exposure compared to their share price since the start of the year.

Their share price has dropped by over a half since the start of the year and now sits the south-side of 500p. When there is a single issue dominating coverage the relationship starts to stand-out and although this is only volume it is a telling comparison.

So what is being compared in this graph? Share and stock price is a measure of the financial worth of a company now and into the future by a group of highly experienced analysts and market makers whose only job is to do that. The volume of media coverage presents a picture of media focus on an issue or brand. The media will respond to any changes they feel notable and which would be of interest to their readers. So, the question is does one indicator lead the other? I am honestly not sure but an interesting alternative might be a measure of media favourability towards the organisation...that could be telling!