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Do Newspaper Articles Predict Aggregate Stock Returns?

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  • Manuel Ammann
  • Roman Frey
  • Michael Verhofen

Abstract

We analyze whether newspaper content can predict aggregate future stock returns. Our study is based on articles published in the Handelsblatt, a leading German financial newspaper, from July 1989 to March 2011. We summarize newspaper content in a systematic way by constructing word-count indices for a large number of words. Word-count indices are instantly available and potentially valuable financial indicators. Our main finding is that newspaper articles have provided information valuable for predicting future DAX returns in and out of sample. We find evidence that the predictive power of newspaper content has increased over time, particularly since 2000. Our results suggest that a cluster analysis approach increases the predictive power of newspaper articles substantially.

Suggested Citation

  • Manuel Ammann & Roman Frey & Michael Verhofen, 2014. "Do Newspaper Articles Predict Aggregate Stock Returns?," Journal of Behavioral Finance, Taylor & Francis Journals, vol. 15(3), pages 195-213, July.
    • Handle: RePEc:taf:hbhfxx:v:15:y:2014:i:3:p:195-213
    DOI: 10.1080/15427560.2014.941061
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    Cited by:

    1. Maghyereh, Aktham & Awartani, Basel & Abdoh, Hussein, 2020. "The effects of investor emotions sentiments on crude oil returns: A time and frequency dynamics analysis," International Economics, Elsevier, vol. 162(C), pages 110-124.
    2. Maghyereh, Aktham & Abdoh, Hussein, 2020. "The tail dependence structure between investor sentiment and commodity markets," Resources Policy, Elsevier, vol. 68(C).
    3. Tom Marty & Bruce Vanstone & Tobias Hahn, 2020. "News media analytics in finance: a survey," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 60(2), pages 1385-1434, June.
    4. Brandt, Richard, 2021. "Economic Policy Uncertainty Index: Extension and optimization of Scott R. Baker, Nicholas Bloom and Steven J. Davis's search term," DoCMA Working Papers 5, TU Dortmund University, Dortmund Center for Data-based Media Analysis (DoCMA).
    5. Saadon, Yossi & Schreiber, Ben Z., 2023. "Newspapers tone and the overnight-intraday stock return anomaly," Journal of Financial Markets, Elsevier, vol. 65(C).
    6. Dorine Boumans & Henrik Müller & Stefan Sauer, 2022. "How Media Content Influences Economic Expectations: Evidence from a Global Expert Survey," ifo Working Paper Series 380, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.

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