Finance and Economics Discussion Series (FEDS)
June 2016
News versus Sentiment: Predicting Stock Returns from News Stories
Steven L. Heston and Nitish R. Sinha
Abstract:
This paper uses a dataset of more than 900,000 news stories to test whether news can predict stock returns. We measure sentiment with a proprietary Thomson-Reuters neural network. We find that daily news predicts stock returns for only 1 to 2 days, confirming previous research. Weekly news, however, predicts stock returns for one quarter. Positive news stories increase stock returns quickly, but negative stories have a long delayed reaction. Much of the delayed response to news occurs around the subsequent earnings announcement.
Keywords: News, Text Analysis
DOI: http://dx.doi.org/10.17016/FEDS.2016.048
PDF: Full Paper