| By: |
Samuel P. Fraiberger;
Do Lee;
Damien Puy;
Romain Ranciere |
| Abstract: |
We assess the impact of media sentiment on international equity prices using
more than 4.5 million Reuters articles published across the globe between 1991
and 2015. News sentiment robustly predicts daily returns in both advanced and
emerging markets, even after controlling for known determinants of stock
prices. But not all news-sentiment is alike. A local (country-specific)
increase in news optimism (pessimism) predicts a small and transitory increase
(decrease) in local returns. By contrast, changes in global news sentiment
have a larger impact on equity returns around the world, which does not
reverse in the short run. We also find evidence that news sentiment affects
mainly foreign – rather than local – investors: although local news optimism
attracts international equity flows for a few days, global news optimism
generates a permanent foreign equity inflow. Our results confirm the value of
media content in capturing investor sentiment. |
| Keywords: |
International financial markets;Capital flows;Asset Pricing, Behavioral Finance, Investor Sentiment, News Media, Natural Language Processing |
| Date: |
2018–12–10 |
| URL: |
http://d.repec.org/n?u=RePEc:imf:imfwpa:18/274&r=all |