Do financial news outlets cater to heterogeneous readers?



I propose that financial news outlets compete by targeting different audiences with different levels of financial sophistication and different degrees of pessimism. If true, such market segmentation should manifest in predictable patterns in financial news coverage and predictable differences in news tone and usage of financial jargon. Using a comprehensive dataset of online news about earnings announcements, results are consistent with such a pattern, suggesting that the predictable, news outlet-specific variability in tone across news posts is of a magnitude of roughly one third of the variability due to the underlying earnings event. For financial jargon the ratio is three quarters. Furthermore, the inferred target audience characteristics of a news outlet significantly improve out-of-sample prediction of coverage, tone, and jargon as well as whether an outlet includes an earnings announcement into market summary posts.