IPO first-day returns, offer price revisions, volatility, and form S-1 language

Abstract

Do investors quickly and rationally react to the content of oil-related news articles revealing supply and demand information? Our paper creates a novel keyword list of 130 oil-related words and modifiers that enable investors/researchers to measure the information content of oil stories. We find significant short-term overreaction to the text of Dow Jones oil-related news articles. Phrases like output cut, production cut, shortage, and demand up in lagged news articles are associated with lower oil prices the following trading day. The evidence is consistent with the notion that oil traders overreact to the content of widely-read news articles.