Assessing News Contagion in Finance

Paola Cerchiello and Giancarlo Nicola
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Paola Cerchiello: Department of Economics and Management Science, University of Pavia, Pavia, 27100 Lombardy, Italy
Giancarlo Nicola: Department of Economics and Management Science, University of Pavia, Pavia, 27100 Lombardy, Italy

Econometrics, 2018, vol. 6, issue 1, 1-19

Abstract: The analysis of news in the financial context has gained a prominent interest in the last years. This is 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: B23 C C00 C01 C1 C2 C3 C4 C5 C8 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:gam:jecnmx:v:6:y:2018:i:1:p:5-:d:130110

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