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Analyzing the Impact of Financial News Sentiments on Stock Prices—A Wavelet Correlation

Author

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  • Marian Pompiliu Cristescu

    (Faculty of Economic Sciences, Lucian Blaga University of Sibiu, 550324 Sibiu, Romania)

  • Dumitru Alexandru Mara

    (Faculty of Economic Sciences, Lucian Blaga University of Sibiu, 550324 Sibiu, Romania)

  • Raluca Andreea Nerișanu

    (Faculty of Economic Sciences, Lucian Blaga University of Sibiu, 550324 Sibiu, Romania)

  • Lia Cornelia Culda

    (Faculty of Economic Sciences, Lucian Blaga University of Sibiu, 550324 Sibiu, Romania)

  • Ionela Maniu

    (Faculty of Sciences, Lucian Blaga University of Sibiu, 550012 Sibiu, Romania)

Abstract

This study investigates the complex interplay between public sentiment, as captured through news titles and descriptions, and the stock prices of three major tech companies: Microsoft (MSFT), Tesla (TSLA), and Apple (AAPL). Leveraging advanced analytical methods including Pearson correlation, wavelet coherence, and regression analysis, this research probes the degree to which stock-price fluctuations can be attributed to the polarity of media sentiment. The methodology combines statistical techniques to assess sentiment’s predictive power for stock opening and closing prices, while wavelet coherence analysis unveils the temporal dynamics of these relationships. The results demonstrate a significant correlation between sentiment polarity and stock prices, with description polarity affecting Microsoft’s opening prices, title polarity influencing Tesla’s opening prices, and a positive impact of title polarity on Apple’s closing prices. However, Tesla’s stock showed no significant coherence, indicating a potential divergence in how sentiment affects stock behavior across companies. The study highlights the importance of sentiment analysis in forecasting stock-market trends, revealing not only direct correlations but also lagged influences on stock prices. Despite its focus on large-cap tech firms, this research provides a foundational understanding of sentiment’s financial implications, suggesting further investigation into smaller firms and other market sectors.

Suggested Citation

  • Marian Pompiliu Cristescu & Dumitru Alexandru Mara & Raluca Andreea Nerișanu & Lia Cornelia Culda & Ionela Maniu, 2023. "Analyzing the Impact of Financial News Sentiments on Stock Prices—A Wavelet Correlation," Mathematics, MDPI, vol. 11(23), pages 1-20, November.
    • Handle: RePEc:gam:jmathe:v:11:y:2023:i:23:p:4830-:d:1291477
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    References listed on IDEAS

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    1. Yugang Yin & Rongfu Tian, 2017. "Investor Sentiment, Financial Report Quality and Stock Price Crash Risk: Role of Short-Sales Constraints," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 53(3), pages 493-510, March.
    2. Li, Kun, 2018. "Reaction to news in the Chinese stock market: A study on Xiong’an New Area Strategy," Journal of Behavioral and Experimental Finance, Elsevier, vol. 19(C), pages 36-38.
    3. Jinfang Li & Chunpeng Yang, 2017. "The cross-section and time-series effects of individual stock sentiment on stock prices," Applied Economics, Taylor & Francis Journals, vol. 49(47), pages 4806-4815, October.
    4. Chahine, Salim & Mansi, Sattar & Mazboudi, Mohamad, 2015. "Media news and earnings management prior to equity offerings," Journal of Corporate Finance, Elsevier, vol. 35(C), pages 177-195.
    Full references (including those not matched with items on IDEAS)

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