The Impact of Investor Sentiment on Direction of Stock Price Changes: Evidence from the Polish Stock Market

Kamil Polak ()
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Kamil Polak: Kozminski University, Warsaw, Poland

Journal of Banking and Financial Economics, 2021, vol. 2, issue 16, 72-90

Abstract: The purpose of this research is to examine the impact of sentiment derived from news headlines on the direction of stock price changes. The study examines stocks listed on the WIG-banking sub-sector index on the Warsaw Stock Exchange. Two types of data were used: textual and market data. The research period covers the years 2015–2018. Through the research, 7,074 observations were investigated, of which 3,390 with positive sentiment, 2,665 neutral, and 1,019 negative. In order to examine the predictive power of sentiment, six machine learning models were used: Decision Tree Classifier, Random Forest Classifier, XGBoost Classifier, KNN Classifier, SVC and Gaussian Naive Bayes Classifier. Empirical results show that the sentiment of news headlines has no significant explanatory power for the direction of stock price changes in one-day time frame.

Keywords: sentiment analysis; natural language processing; machine learning; financial forecasting; behavioral finance (search for similar items in EconPapers)
JEL-codes: G14 G17 G41 (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:sgm:jbfeuw:v:2:y:2022:i:16:p:72-90

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