Trade sentiment and the stock market: new evidence based on big data textual analysis of Chinese media
Leonardo Gambacorta (),
Chao He and
Fan Dora Xia
No 917, BIS Working Papers from Bank for International Settlements
Trade tensions between China and US have played an important role in swinging global stock markets but effects are difficult to quantify. We develop a novel trade sentiment index (TSI) based on textual analysis and machine learning applied on a big data pool that assesses the positive or negative tone of the Chinese media coverage, and evaluates its capacity to explain the behaviour of 60 global equity markets. We find the TSI to contribute around 10% of model capacity to explain the stock price variability from January 2018 to June 2019 in countries that are more exposed to the China-US value chain. Most of the contribution is given by the tone extracted from social media (9%), while that obtained from traditional media explains only a modest part of stock price variability (1%). No equity market benefits from the China-US trade war, and Asian markets tend to be more negatively affected. In particular, we find that sectors most affected by tariffs such as information technology related ones are particularly sensitive to the tone in trade tension.
Keywords: stock returns; trade; sentiment; big data; neural network; machine learning (search for similar items in EconPapers)
JEL-codes: C45 C55 D80 F13 F14 G15 (search for similar items in EconPapers)
Pages: 48 pages
New Economics Papers: this item is included in nep-big, nep-cmp, nep-cna, nep-cwa, nep-fmk, nep-ict, nep-int, nep-ore and nep-pay
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Working Paper: Trade sentiment and the stock market: new evidence based on big data textual analysis of Chinese media (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:bis:biswps:917
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