Media Sentiment and International Asset Prices
IMF Working Papers, December 10, 2018
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- Media Sentiment and International Asset Prices
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Bibliographic details
- Authors: Samuel P. Fraiberger, Dongyeol Lee, Damien Puy, Romain Ranciere
- Published: December 10, 2018
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781484389218.001
Scope, data, and methodology
- Dataset: more than 4.5 million Reuters articles published across the globe between 1991 and 2015.
- Coverage: multi-country daily news-sentiment measures used to predict international equity prices.
- Publication details: 33 pages; Working Paper No. 2018/274; Issue 274; Volume 2018; DOI: https://doi.org/10.5089/9781484389218.001; ISBN: 9781484389218; ISSN: 1018-5941.
Main findings on asset-price predictability
- News sentiment robustly predicts daily returns in both advanced and emerging markets, even after controlling for known determinants of stock prices.
- Local (country-specific) news sentiment:
- A local increase in news optimism predicts a small and transitory increase in local returns.
- A local increase in news pessimism predicts a small and transitory decrease in local returns.
- Global news sentiment:
- Changes in global news sentiment have a larger impact on equity returns around the world.
- The impact of global news sentiment does not reverse in the short run (i.e., effects are persistent over short horizons).
Investor behavior and capital-flow effects
- News sentiment affects mainly foreign — rather than local — investors:
- Local news optimism attracts international equity flows for a few days.
- Global news optimism generates a permanent foreign equity inflow.
Implications and interpretation
- Media content provides valuable signals that capture investor sentiment and help explain international equity-price movements.
- Distinction between local and global sentiment is crucial: local sentiment drives short-lived local price changes, while global sentiment drives larger and more persistent cross-border asset-price responses and capital flows.
Subject tags and research keywords
- Subjects: Asset prices, Balance of payments, Capital flows, Emerging and frontier financial markets, Financial institutions, Financial markets, Prices, Stock markets, Stocks.
- Keywords: Asset prices, Asset Pricing, Behavioral Finance, Capital Flows, D. News sentiment, Emerging and frontier financial markets, equity fund, equity price, equity return, Global, Investor Sentiment, multi-country news, Natural Language Processing, News Media, sentiment index, sentiment shock, state dependence, Stock markets, Stocks, WP.
Source: "Media Sentiment and International Asset Prices", Samuel P. Fraiberger, Dongyeol Lee, Damien Puy, Romain Ranciere, IMF Working Papers 2018, 274 (2018).
Content in this bundle
- Media Sentiment and International Asset Prices, WP/18/274, December 2018