Media Sentiment and International Asset Prices

By Samuel P. Fraiberger, Dongyeol Lee, Damien Puy, Romain Ranciere

December 10, 2018

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Format: Chicago

Samuel P. Fraiberger, Dongyeol Lee, Damien Puy, and Romain Ranciere. Media Sentiment and International Asset Prices, (USA: International Monetary Fund, 2018) accessed November 17, 2024

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.

Subject: 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

Publication Details

Pages:

33
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2018/274
Stock No:

WPIEA2018274
ISBN:

9781484389218
ISSN:

1018-5941

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