Title: The impact of newspapers on consumer confidence: does spin bias exist?
Abstract: Abstract It is sometimes argued that news reports in the media suffer from biased reporting. Mullainathan and Shleifer (Citation2002, 2005) argue that there are two types of media bias. One bias, called ideology, reflects a news outlet's desire to affect reader opinions in a particular direction. The second bias, referred to as 'spin' or 'slanting', reflects the outlet's attempt to simply create a memorable story. Competition between outlets can eliminate the effect of ideological bias, but increases the incentive to spin or slant stories. We examine whether we find some evidence of spin in Dutch newspaper reporting on the state of the economy. If newspapers are indeed able to create memorable stories this should, according to our hypothesis, affect the opinion of readers with respect to the state of the economy. Sentiments about the actual state of the economy could be magnified by spin. As a result, consumer confidence–a variable that routinely measures the opinion on the state of the economy–can be expected to be affected not only by economic fundamentals, but also by the way these fundamentals are reported. We construct a variable that reflects the way consumers perceive economic news reported in newspapers. We find that this variable indeed has a significant impact on consumer confidence, which is short-lived. Acknowledgements We would like to thank Tammo Bijmolt, Bob Chirinko, Peter van Els, Jan Jacobs, Ger Lanjouw, Peter Leeflang, Ad Stokman, Michel Wedel and Peter Zwart for comments on an earlier version of this article. Research assistance by Mark Dijkstra is gratefully acknowledged. Notes 1 See Jansen (Citation2003). 2 So, sample size is less relevant here than in most other (market) research using respondents since in the latter case a large sample size actually has to outweigh differences in answers between respondents. 3 The augmented Dickey–Fuller test statistics on levels including trend and intercept are −1.159, −1.669 and −6.232 for CC, PC and MEDIA respectively. the 5% significance level is −3.489. The augmented Dickey–Fuller test statistics on first differences including trend and intercept are −3.940 and −7.536 for CC and PC respectively. The 5%-significance level is −2.914. 4 Assuming no deterministic trend and one lag of the first differenced terms, both the trace test and the max-eigenvalue test indicate one cointegrating equation at the 5%-significance level between CC and PC. The cointegrating equation is: CC = 4.837 PC, with the co-integrating coefficient having a SE of 0.698. 5 The Cholesky ordering in the impulse-response analysis is MEDIA, CC and PC. This implies that MEDIA is not affected by CC and PC and that CC is affected only by MEDIA and not by PC. PC on the other hand is affected by both MEDIA and CC. Generalized impulses, or alternative orderings, generate the same effects as shown in Fig. 2. Furthermore, we also experimented by including the SD of MEDIA explicitly in the model. this extra variable was not significant and does not effect the results. This is consistent with the fact that the Cronbach alpha is sufficiently high. 6 The 10% significance level implies ±1.6 SE bands around the impulse responses. 7 In this VAR the Cholesky ordering in the impulse-response analysis is AEX, MEDIA, CC and PC. The optimal number of lags remains one. We also experimented with unemployment as an additional variable. In a qualitative sense this gives similar results compared to those with respect to the AEX.