Media Attention and Stock Categorization: An Examination of Stocks Hyped to Benefit from the Olympics

We examine five summer Olympics and identify stocks that media outlets hype as benefiting from the Olympics (Olympic stocks). We find that Olympic stocks exhibit increases in comovement of returns after the announcement of the winning bid and declines in comovements after the games are played, consistent with the Olympics being used by investors as a category for investment. Furthermore, Olympic stock returns outperform their matched counterparts over this time period. To determine whether investors’ response to the Olympics is rational, we examine fundamentals (profitability, revenues, and cash flows) but find no evidence of improved fundamentals or changes in fundamental comovements. We next investigate whether positive investor sentiment caused by the media hype is driving the categorization and valuation impacts. Consistent with investor sentiment, we find higher trading volume and higher volatility on days where media outlets first have stories linking the firm to the Olympic games and stronger effects in firms with more retail investors. To clarify event-based categorization occurs in other settings where media outlets classify stocks for investment, we show comovement increases for stocks classified as “Stay-at-Home” at the start of the COVID-19 pandemic. Overall, our results suggest that when media outlets categorize stocks for investment, this increases investor awareness and recognition, which in turn impacts comovement risk and increases categorized firms’ valuations.