Media Sentiment and International Asset Prices

34 Pages Posted: 7 Dec 2018 Last revised: 8 Dec 2018

See all articles by Samuel P. Fraiberger

Samuel P. Fraiberger

Computer Science; Harvard University - Institute for Quantitative Social Sciences; Northeastern University - Network Science Institute

Do Q Lee

International Monetary Fund (IMF) - Research Department

Damien Puy

International Monetary Fund (IMF)

Romain Rancière

University of Southern California

Multiple version iconThere are 2 versions of this paper

Date Written: November 19, 2018

Abstract

This paper assesses the impact of media sentiment on international equity prices using a dataset of more than 4.5 million Reuters articles published across the globe between 1991 and 2015. Media 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. Media 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.

Keywords: Investment and Investment Climate, Commodity Risk Management, International Trade and Trade Rules, Non Bank Financial Institutions, Mutual Funds, Securities Markets Policy & Regulation, Capital Markets and Capital Flows, Capital Flows

Suggested Citation

Fraiberger, Samuel P. and Lee, Do Q and Puy, Damien and Rancière, Romain, Media Sentiment and International Asset Prices (November 19, 2018). World Bank Policy Research Working Paper No. 8649. Available at SSRN: https://ssrn.com/abstract=3297320

Samuel P. Fraiberger (Contact Author)

Computer Science ( email )

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New York, NY 10012
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Harvard University - Institute for Quantitative Social Sciences ( email )

1737 Cambridge St
Cambridge, MA 02115
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Northeastern University - Network Science Institute ( email )

177 Huntington Avenue
Boston, MA 02115
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Do Q Lee

International Monetary Fund (IMF) - Research Department ( email )

700 19th Street NW
Washington, DC 20431
United States

Damien Puy

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Romain Rancière

University of Southern California ( email )

2250 Alcazar Street
Los Angeles, CA 90089
United States

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