Working Paper: Seeing Through the Spin: The Effect of News Sentiment on Firms' Stock Market Performance
Working Paper - October 2019 - No. 141
We show that Stock market investors react only on the objective facts and not the spin in media articles. We use natural language processing tools to compute the tone of 288 thousands articles written by Reuters between 2000 and 2018, and show that it predicts the short-term stock market performance of companies. However, by exploiting a combination of unsupervised machine learning and econometric techniques, we show that this effect is only due to the informational content of the article, and not the framing of that article. The market sees through media spin and can filter informational content from irrelevant tone.