How News Affect the Trading Behavior of Different Categories of Investors in a Financial Market

30 Pages Posted: 16 Jul 2012

See all articles by Fabrizio Lillo

Fabrizio Lillo

Università di Bologna

Salvatore Miccichè

University of Palermo - Department of Physics and Chemistry

Michele Tumminello

University of Palermo; Carnegie Mellon University - Department of Social and Decision Sciences

Jyrki Piilo

University of Turku

Rosario N. Mantegna

University of Palermo

Date Written: July 16, 2012

Abstract

We investigate the trading behavior of a large set of single investors trading the highly liquid Nokia stock over the period 2003-2008 with the aim of determining the relative role of endogenous and exogenous factors that may affect their behavior. As endogenous factors we consider returns and volatility, whereas the exogenous factors we use are the total daily number of news and a semantic variable based on a sentiment analysis of news. Linear regression and partial correlation analysis of data show that different categories of investors are differently correlated to these factors. Governmental and non profit organizations are weakly sensitive to news and returns or volatility, and, typically, they are more correlated with the former than with the latter. Households and companies, on the contrary, are very sensitive to both endogenous and exogenous factors, and volatility and returns are, on average, much more relevant than the number of news and sentiment, respectively. Finally, financial institutions and foreign organizations are intermediate between these two cases, in terms of both the total explanatory power of these factors and their relative importance.

Keywords: Firm-specific news, News sentiment, Trading, Single investors

JEL Classification: G14

Suggested Citation

Lillo, Fabrizio and Miccichè, Salvatore and Tumminello, Michele and Piilo, Jyrki and Mantegna, Rosario Nunzio, How News Affect the Trading Behavior of Different Categories of Investors in a Financial Market (July 16, 2012). Available at SSRN: https://ssrn.com/abstract=2109337 or http://dx.doi.org/10.2139/ssrn.2109337

Fabrizio Lillo

Università di Bologna ( email )

Via Zamboni, 33
Bologna, 40126
Italy

Salvatore Miccichè

University of Palermo - Department of Physics and Chemistry ( email )

Viale delle Scienze, Ed. 17
Palermo, PA 90128
Italy
+3909123899145 (Phone)

HOME PAGE: http://www.unipa.it/~salvatore.micciche

Michele Tumminello

University of Palermo ( email )

Viale delle Scienza
Palermo, Palermo 90128
Italy

Carnegie Mellon University - Department of Social and Decision Sciences ( email )

Pittsburgh, PA 15213-3890
United States

Jyrki Piilo

University of Turku ( email )

Turku Centre for Quantum Physics
Department of Physics and Astronomy
FIN-20014 TURKU
Finland

Rosario Nunzio Mantegna (Contact Author)

University of Palermo ( email )

Dipartimento di Fisica e Chimica
Viale delle Scienze, Edificio 18
Palermo, PA I-90128
Italy
+3909123899074 (Phone)
+3909123860815 (Fax)

HOME PAGE: http://www.unipa.it/persone/docenti/m/rosario.mantegna

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