The Impact of Textual Sentiment on Sovereign Bond Yield Spreads: Evidence from the Eurozone Crisis

Sha Liu ()
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Sha Liu: University of Southampton, UK

Multinational Finance Journal, 2014, vol. 18, issue 3-4, 215-248

Abstract: This study examines the relation between textual sentiment (media pessimism), the concentration/volume of news, and sovereign bond yield spreads, specifically in Greece, Ireland, Italy, Portugal and Spain during the European sovereign debt crisis from 2009 to 2012. The findings suggest that higher media pessimism and greater concentration/volume of news collectively communicate additional value-relevant information that has not been quantified by traditional determinants of yield spreads. If higher media pessimism is coupled with greater concentration/volume of news and other factors remain unchanged, yield spreads would move upwards, causing prices to fall. Media pessimism and the number of news stories respectively and collectively help predict the widening of yield spreads. Higher media pessimism level is strongly associated with more news stories being reported, suggesting that “no news is good news.”

Keywords: textual sentiment; media pessimism; information supply; sovereign bond yield spreads; European sovereign debt crisis (search for similar items in EconPapers)
JEL-codes: E43 G12 G14 G15 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:mfj:journl:v:18:y:2014:i:3-4:p:215-248

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