By Gregg Castano, President, Business Wire
A news announcement’s value is only as effective as the measured impact it has on the intended audience. For publicly traded companies, the biggest impact is typically financial, to influence individuals in how they invest in and analyze the markets. University of Chicago doctoral candidate Eugene Soltes conducted a study in 2009 aiming to find a correlation between the dissemination of company issued news and beneficial fluctuations in capital markets. His research, including the analysis of 9.3 million articles, indicated that, “greater dissemination causally leads to lower spreads, increased share turnover, and lower idiosyncratic volatility.”
Identifying the best avenue for news issuance is a vital decision that can dictate the future of company communications. Business Wire has a vested interest in being the optimal avenue and made it a priority to define the unmatched benefits our services provide. With the help of News Quantified, we decided to put Eugene Soltes’ theory to the test by setting out to measure the impact of company issued news on financial markets by the top newswire services. The report was based on an assessment of key financial elements including bid-ask, volume, and volatility.
The execution of this study was intended to paint a definitive picture of how company announcements issued via a newswire, specifically Business Wire, affect market activity. The results were significant and they were consistent. The beneficial impact of a Business Wire issued news release on stock market activity is second to none.
The data for the report was compiled by a first-of-its kind research initiative conducted by News Quantified that leveraged a sample size of over 211,000 press releases issued between January 2014 and April 2015.The releases were for companies whose stocks trade on the NYSE and NASDAQ and were disseminated by Business Wire, PR Newswire, GlobeNewswire and MarketWired.
What were the results? Releases issued through Business Wire had a 4x bid-ask spread improvement over the combined average of the other tested newswires. This means that Business Wire issued news releases influenced easier conversion of stock to cash. Other metrics assessed showed similar results. Business Wire’s influence on trading volume showed to be 24% greater and volatility saw a 16% reduction when compared to the combined average of the other wires. For news releases issued through Business Wire the result was more stock being traded with more stable fluctuations in price change. All across the board the numbers show that investors are not only paying attention to, but also acting upon the news stemming from Business Wire’s patented distribution network.
An analysis of the difference between asking price and the price a buyer is willing to pay for a stock on the day company news is disseminated illustrates a direct cause and effect. How does a news release influence the liquidity of a stock? The same applies to measuring the amount of stock being traded in a given amount of time and the amount of uncertainty or risk regarding the size of changes in a stock’s value. These bid-ask spread, volume, and volatility figures, as well as the other metrics provided in the report, pinpoint the beneficial influence a Business Wire issued news release has on investor sentiment.
This data is significant because it exhibits a consistent pattern. These findings are based on the foundation of a bridge between public relations and investor relations. When financial ROI is tied to company issued news, one distribution method stands above the rest. A news release issued through Business Wire will have the strongest impact on trading activity around your company stock.
News Quantified is an industry leading innovator in measuring news’ impact on stock market activity. Founded by Oliver Schmalholz, News Quantified utilizes a specially developed software system to monitor daily news releases and the trading behavior of specifically selected stocks. The extensive measurements provided facilitate a clear understanding of the type of investors being reached by company issued news and how their trading behavior is being influenced.
Business Wire has a long tradition of earning trust from both media and communications professionals. A measure of that trust and the value we bring to our partners can been seen in the News Quantified analysis that identifies Business Wire’s superior market benefit on company issued news. This is a new benchmark of influence and we look forward to continuing to drive innovation in market-moving news dissemination for our customers. For news results that matter most in the C-Suite, there is no more effective “wire” than Business Wire.
Learn how Business Wire’s Market Impact Report facilitates access to data attributing tangible ROI to communications management for US publicly traded companies listed on the NYSE, NASDAQ, OTC, and now for Canadian companies listed on the Toronto Stock Exchange (TSX) and TSX Venture Exchange.