News as Sources of Jumps in Stock Returns: Evidence From 21 Million News Articles for 9000 Companies

66 Pages Posted: 25 Aug 2021 Last revised: 24 Mar 2022

See all articles by Yoontae Jeon

Yoontae Jeon

McMaster University - Michael G. DeGroote School of Business

Thomas H. McCurdy

University of Toronto - Rotman School of Management

Xiaofei Zhao

Georgetown University - McDonough School of Business

Date Written: February 8, 2021

Abstract

Material news events can be potentially important sources of jumps in stock returns. We collect 21 million news articles associated with more than 9,000 publicly-traded companies and use textual analyses to derive measures to summarize the news. We find that stock return jumps (including time-variation in jump-size distributions and jump intensity) are significantly related to news flow frequency and content and those effects increase substantially over the last few decades. The sensitivity of jump probability to news is stronger for firms with higher media visibility, analyst coverage, and institutional ownership. This sensitivity also varies across different news categories.

The primary working dataset based on Factiva news can be downloaded using this link: https://www.dropbox.com/s/62lt6uq1t4n6gcr/MainData_Factiva_Public.zip?dl=0.

Keywords: Jumps; News frequency; Textual analysis; News content; Sentiment

JEL Classification: G10, G14, G19

Suggested Citation

Jeon, Yoontae and McCurdy, Thomas H. and Zhao, Xiaofei, News as Sources of Jumps in Stock Returns: Evidence From 21 Million News Articles for 9000 Companies (February 8, 2021). Journal of Financial Economics (JFE), In Press. https://doi.org/10.1016/j.jfineco.2021.08.002, Rotman School of Management Working Paper No. 3911398, Georgetown McDonough School of Business Research Paper No. 3911398, Available at SSRN: https://ssrn.com/abstract=3911398

Yoontae Jeon

McMaster University - Michael G. DeGroote School of Business ( email )

1280 Main Street West
Hamilton, Ontario L8S 4M4
Canada

Thomas H. McCurdy

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada
416-978-3425 (Phone)
416-971-3048 (Fax)

HOME PAGE: http://www-2.rotman.utoronto.ca/~tmccurdy

Xiaofei Zhao (Contact Author)

Georgetown University - McDonough School of Business ( email )

3700 O Street, NW
Washington, DC 20057
United States

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