Assessing News Contagion in Finance

Paola Cerchiello () and Giancarlo Nicola ()
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Giancarlo Nicola: Department of Economics and Management, University of Pavia

No 139, DEM Working Papers Series from University of Pavia, Department of Economics and Management

Abstract: The analysis of news data in the financial context has gained a prominent interest in the last years. This because of the possible predictive power of such content especially in terms of associated sentiment/mood. In this paper we focus on a specific aspect of financial news analysis: how the covered topics modify according to space and time dimensions. To this purpose, we employ a modified version of topic model LDA, the so called Structural Topic Model (STM), that takes into account covariates as well. Our aim is to study the possible evolution of topics extracted from two well known news archive - Reuters and Bloomberg - and to investigate a causal effect in the diffusion of the news by means of a Granger causality test. Our results show that both the temporal dynamics and the spatial differentiation matter in the news contagion.

Keywords: behavioural finance; financial news; structural topic model; Granger causality. (search for similar items in EconPapers)
JEL-codes: C12 C83 E58 E61 G02 G14 (search for similar items in EconPapers)
Pages: 17 pages
Date: 2017-05
New Economics Papers: this item is included in nep-cfn and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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