In the fast-moving world of stock markets, media coverage can be both a blessing and a curse.

While glowing headlines might initially send stocks soaring, research suggests that prolonged media attention often signals trouble for long-term performance.

As investors chase "hot" stocks plastered across front pages, these companies frequently underperform in subsequent months.

Let's explore the reasons behind this phenomenon and examine key academic studies that provide insight into the "media effect" on stock returns.

The Media Effect… Explained

When a company starts dominating headlines, it's often because of remarkable news – soaring revenues, groundbreaking products, or impressive market share gains.

This media coverage generates a surge of interest from retail investors, many of whom jump into the market after much of the initial price appreciation has already occurred.

The result? A stock that becomes overvalued and primed for correction.

But does media coverage alone impact future returns?

Several studies indicate that media attention is more than just noise – it plays a critical role in shaping investor behavior and, consequently, stock performance.

1. "Media Coverage and the Cross-Section of Stock Returns" (Fang & Peress, 2009)

This study, published in The Journal of Finance, investigates whether media coverage affects stock performance over time.

The authors analyzed thousands of stocks and compared those with extensive media coverage to "neglected" stocks that received little to no attention.

• Findings: Stocks with high media coverage underperformed relative to less-covered stocks by 3-4% annually.

• Explanation: The underperformance was attributed to heightened trading volumes and overreaction by retail investors drawn in by media buzz, leading to inflated valuations.

2. "Investor Attention and Stock Prices" (Barber & Odean, 2008)

This study explored how investor attention, driven by factors like media mentions, influenced trading behavior and stock prices.

The research focused on abnormal trading volumes and stock returns following significant media events.

• Findings: Stocks that received substantial media attention experienced short-term price spikes, followed by long-term underperformance.

• Explanation: The influx of less-informed retail investors amplified price volatility, leading to poor subsequent returns.

Quantum Computing – The Next Media Hype Cycle Victim

Quantum computing has recently captured the imagination of investors, tech enthusiasts, and media outlets.

Some quantum stocks increased tenfold in 2024, with much of the upside coming in the wake of Google’s announcement of Willow – their state of the art quantum computing chip – in early December.

However, these stocks have been terrible performers in 2025.

Last week, Nvidia CEO Jensen Huang cast doubt on the near-term viability of quantum computing, stating that "very simple quantum computers" may still be 20 years away.

This sobering assessment triggered a dramatic market reaction, with several quantum computing stocks plunging over 40% in a single day. (With more losses occurring today)

The media spotlight on quantum computing has undoubtedly contributed to its rise – and now possibly its fall.

Ambitious technologies that are still years away from widespread commercialization often go through hype cycles. One day quantum technology is top of mind for investors, sending stocks soaring, and the next day investors are left with an expensive stock lacking the fundamentals to justify its high valuation.

We've seen this pattern play out repeatedly in recent years.

Take autonomous and electric vehicles over the last decade as examples. Their stocks often spiked when new developments hit the news, as investors rush in, convinced they'll never get a better opportunity.

But once the media buzz faded, these stocks quickly retreated as reality set in and enthusiasm waned.

Instead, investors would do well to:

1. Focus on Fundamentals: Assess the underlying business model and long-term viability of a company's technology.

2. Avoid the Hype Cycle: Be cautious of stocks experiencing rapid gains solely due to media buzz.

3. Diversify Away from Media-Driven Stocks: Balance your portfolio with investments grounded in proven performance and clear growth strategies, not just whatever CNBC is talking about.

Investors must learn to distinguish between fleeting trends and sustainable growth opportunities.

While promising innovations like quantum computing hold long-term potential, timelines often extend far beyond the market's short-term focus.

Quantum computing may one day reshape the world, but enduring market success often requires tuning out the noise and staying committed to time-tested strategies.

Stick with The Million Mission, where we explore investment opportunities grounded in clarity, not just what's grabbing headlines.