Examining the effects of news and media sentiments on volatility and correlation: Evidence from the UK

Mohammad Alomari, Al Rababa’a, Abdel Razzaq, Ghaith El-Nader, Ahmad Alkhataybeh and Mobeen Ur Rehman

The Quarterly Review of Economics and Finance, 2021, vol. 82, issue C, 280-297

Abstract: This paper examines the effect of news and social media sentiments on the stock and bond market volatility and their dynamic return correlation over the period 1998−2017. A principal component analysis is used to construct sentiment variables. Results indicate that news sentiments have more pronounced effects on volatility while social media show stronger impacts on the correlation. These sentiments also exhibit strong and significant reflections on volatility persistence. Furthermore, result show economically different impacts of some sentiments across different market states. Finally, an extended model with news sentiments performs better in forecasting returns than the basic and social media ones.

Keywords: Stock-bond correlation; Sentiment; Principal Component Analysis; Volatility (search for similar items in EconPapers)
JEL-codes: C58 G12 G15 G41 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:quaeco:v:82:y:2021:i:c:p:280-297

DOI: 10.1016/j.qref.2021.09.013

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