Media Sentiment and International Asset Prices

Author/Editor:

Samuel P. Fraiberger ; Do Lee ; Damien Puy ; Romain Ranciere

Publication Date:

December 10, 2018

Electronic Access:

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Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary:

We assess the impact of media sentiment on international equity prices using more than 4.5 million Reuters articles published across the globe between 1991 and 2015. News sentiment robustly predicts daily returns in both advanced and emerging markets, even after controlling for known determinants of stock prices. But not all news-sentiment is alike. A local (country-specific) increase in news optimism (pessimism) predicts a small and transitory increase (decrease) in local returns. By contrast, changes in global news sentiment have a larger impact on equity returns around the world, which does not reverse in the short run. We also find evidence that news sentiment affects mainly foreign – rather than local – investors: although local news optimism attracts international equity flows for a few days, global news optimism generates a permanent foreign equity inflow. Our results confirm the value of media content in capturing investor sentiment.

Series:

Working Paper No. 18/274

Subject:

English

Publication Date:

December 10, 2018

ISBN/ISSN:

9781484389218/1018-5941

Stock No:

WPIEA2018274

Price:

$18.00 (Academic Rate:$18.00)

Format:

Paper

Pages:

33

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