The tone of financial news and the perceptions of stock and CDS traders

Michael Liebmann, Alexei G. Orlov and Dirk Neumann

International Review of Financial Analysis, 2016, vol. 46, issue C, 159-175

Abstract: This paper applies novel sentiment analyses to Reuters news to study stock and CDS traders' differential interpretations of financial news. We construct sentiment measures to identify which news content influences investors' behavior and create dynamic word lists that reflect the divergent viewpoints of CDS and equity investors. We find that (1) equity and CDS traders focus on different content within the same news; (2) traders particularly disagree with respect to news concerning debt topics, especially regarding M&A activity; (3) the Great Recession impacted debt news content and altered the typical inverse relationship between equity and CDS markets on news days.

Keywords: News content analysis; Sentiment analysis; Financial news; Investor perception; The Great Recession; News anticipation; Post-announcement drift; Semi-strong market efficiency (search for similar items in EconPapers)
JEL-codes: G12 G14 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:46:y:2016:i:c:p:159-175

DOI: 10.1016/j.irfa.2016.05.001

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