Do Investors Read Too Much into News? How News Sentiment Causes Price Formation

Author

Feuerriegel, Stefan ; Heitzmann, Sebastian Felix ; Neumann, Dirk

Author_Institution

Univ. of Freiburg, Freiburg, Germany

fYear

2015

fDate

5-8 Jan. 2015

Firstpage

4803

Lastpage

4812

Abstract

It is a well-known fact that financial markets react to information. Even though this relationship seems simple, finding evidence is not easy since information is embedded in textual news releases. Only recent have researchers started to look at the content of news. Interestingly, previous work avoids the inference of a causal relationship between news messages and abnormal returns. In this paper, we concentrate on the oil market from which we identify a (strong) instrument, namely, the number of terroristic attacks, and can reasonably account for the endogeneity problem associated with news releases. In addition, we study how news releases affect stock prices temporally. Thus, we find that a change in news sentiment entails a large change in oil prices.

Keywords

financial data processing; petroleum industry; share prices; stock markets; text analysis; endogeneity problem; financial markets; news sentiment; oil market; price formation; stock prices; terroristic attacks; textual news releases; Biological system modeling; Correlation; Instruments; Measurement; Sentiment analysis; Terrorism; Vectors;

fLanguage

English

Publisher

ieee

Conference_Titel

System Sciences (HICSS), 2015 48th Hawaii International Conference on

Conference_Location

Kauai, HI

ISSN

1530-1605

Type

conf

DOI

10.1109/HICSS.2015.571

Filename

7070391