Media Sentiment and International Asset Prices

Samuel Fraiberger, Do Lee, Damien Puy and Romain Ranciere

No 2018/274, IMF Working Papers from International Monetary Fund

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: WP; equity fund; Asset Pricing; Capital Flows; Behavioral Finance; Investor Sentiment; News Media; Natural Language Processing; sentiment shock; sentiment index; state dependence; D. News sentiment; multi-country news; equity return; equity price; Stocks; Asset prices; Stock markets; Emerging and frontier financial markets; Global (search for similar items in EconPapers)
Pages: 33
Date: 2018-12-10
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Citations: View citations in EconPapers (15)

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Related works:
Journal Article: Media sentiment and international asset prices (2021)
Working Paper: Media Sentiment and International Asset Prices (2018)
Working Paper: Media Sentiment and International Asset Prices (2018)
Working Paper: Media Sentiment and International Asset Prices (2018)
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