Open access
Author
Date
2011-09Type
- Working Paper
ETH Bibliography
yes
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Abstract
We examine the statistical power of fundamental and behavioural factors with regards to stock returns of the Dow Jones Industrials Index. With a novel sentiment dataset from over 3.6 million Reuters news articles, we find signifcant correlations between Reuters sentiment and stock returns. We show with vector autoregression and error correction models that sentiment can explain and predict changes in stock returns better than macroeconomic factors. Considering positive and negative sections of Reuters sentiment, we find that negative sentiment performs better in simple trading strategies to predict stock returns than positive sentiment, while the sentiment effect remains over months. Show more
Permanent link
https://doi.org/10.3929/ethz-a-006620590Publication status
publishedJournal / series
KOF Working PapersVolume
Publisher
KOF Swiss Economic Institute, ETH ZurichSubject
INVESTMENT DECISIONS; BETRIEBSWIRTSCHAFTLICHE PROGNOSE; Out-of-sample forecasts; Reuters sentiment; MAKROÖKONOMISCHE MODELLE (OPERATIONS RESEARCH); INVESTITIONSENTSCHEIDE; CAPITAL BUDGETING; Stock returns; INVESTITIONSRECHNUNG; BUSINESS FORECASTS; FINANCIAL MARKETS; MACROECONOMIC MODELS (OPERATIONS RESEARCH); Vector error correction model; FINANZMÄRKTEOrganisational unit
02525 - KOF Konjunkturforschungsstelle / KOF Swiss Economic Institute
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ETH Bibliography
yes
Altmetrics