Mechanically Extracted Company Signals and their Impact on Stock and Credit Markets
AbstractI analyze company news from Reuters with the 'General Inquirer' and relate measures of positive sentiment, negative sentiment and disagreement to abnormal stock returns, stock and option trading volume, the volatility spread and the CDS spread. I test hypotheses derived from market microstructure models. Consistent with these models, sentiment and disagreement are strongly related to trading volume. Moreover, sentiment and disagreement might be used to predict stock returns, trading volume and volatility. Trading strategies based on positive and negative sentiment are profitable if the transaction costs are moderate, indicating that stock markets are not fully efficient.
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Bibliographic InfoPaper provided by Department of Economics, University of Konstanz in its series Working Paper Series of the Department of Economics, University of Konstanz with number 2011-18.
Length: 41 pages
Date of creation: 31 May 2011
Date of revision:
Find related papers by JEL classification:
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing
- G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies
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