Trade Sentiment and the Stock Market: New Evidence Based on Big Data Textual Analysis of Chinese Media
46 Pages Posted: 30 Mar 2022
Abstract
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. We find the TSI to contribute around 10% of model capacity to explain the stock price variability of 60 equity markets 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%).
Keywords: Stock returns, Trade, sentiment, big data, Machine Learning
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