IDEAS home Printed from https://ideas.repec.org/a/ukm/jlekon/v55y2021i3p1-21.html
   My bibliography  Save this article

The Impact of News Sentiment on the Stock Market Fluctuation: The Case of Selected Energy Sector

Author

Listed:
  • Wu, Ling

    (Department of Software Engineering Faculty of Computer Science & Information Technology University of Malaya 50603 Kuala Lumpur MALAYSIA.)

  • Hock Ow, Siew

    (Department of Software Engineering Faculty of Computer Science & Information Technology University of Malaya 50603 Kuala Lumpur MALAYSIA.)

Abstract

This paper examines the impact of the sentiments of OPEC news on stock market prices of public listed oil and gas companies in Bursa Malaysia. We used data of stock market prices from randomly selected oil and gas companies for the period of 2012 to 2017. For the methodology, we first established a supervised machine learning algorithm-based news classifier to classify the OPEC news following its sentiments. We developed a financial news sentiment classifier by combining machine learning algorithms and lexicon-based labelling methods. We then applied the event study method to investigate how stock market prices react to OPEC news’ sentiment. The results showed a negative correlation between OPEC news sentiment and stock market prices of oil and gas companies during the event window based on each OPEC news release date. The results further showed that the stock market prices do not react to OPEC news sentiment on event day. These findings should provide some guides to stock investors on the movement of the selected stock market prices of energy sector companies during the event window period.

Suggested Citation

  • Wu, Ling & Hock Ow, Siew, 2021. "The Impact of News Sentiment on the Stock Market Fluctuation: The Case of Selected Energy Sector," Jurnal Ekonomi Malaysia, Faculty of Economics and Business, Universiti Kebangsaan Malaysia, vol. 55(3), pages 1-21.
    • Handle: RePEc:ukm:jlekon:v:55:y:2021:i:3:p:1-21
    DOI: http://dx.doi.org/10.17576/JEM-2021-5503-01
    as

    Download full text from publisher

    File URL: http://www.ukm.my/jem/wp-content/uploads/2021/08/jeko_553-1.pdf
    Download Restriction: no
    File URL: https://libkey.io/http://dx.doi.org/10.17576/JEM-2021-5503-01?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Yu, Tiffany Hui-Kuang & Huarng, Kun-Huang, 2020. "A new event study method to forecast stock returns: The case of Facebook," Journal of Business Research, Elsevier, vol. 115(C), pages 317-321.
    2. Al Rousan, Sahel & Sbia, Rashid & Tas, Bedri Kamil Onur, 2018. "A dynamic network analysis of the world oil market: Analysis of OPEC and non-OPEC members," Energy Economics, Elsevier, vol. 75(C), pages 28-41.
    3. H Khoj & H. Akeel, 2020. "Testing Weak-Form Market Efficiency: The Case of Saudi Arabia," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 10(6), pages 644-653.
    4. Hyndman, Kyle, 2008. "Disagreement in bargaining: An empirical analysis of OPEC," International Journal of Industrial Organization, Elsevier, vol. 26(3), pages 811-828, May.
    5. Alina Sorescu & Nooshin L. Warren & Larisa Ertekin, 2017. "Event study methodology in the marketing literature: an overview," Journal of the Academy of Marketing Science, Springer, vol. 45(2), pages 186-207, March.
    6. Jiayu Qiu & Bin Wang & Changjun Zhou, 2020. "Forecasting stock prices with long-short term memory neural network based on attention mechanism," PLOS ONE, Public Library of Science, vol. 15(1), pages 1-15, January.
    7. Bina Cyrus & Vo Minh, 2007. "OPEC in the Epoch of Globalization: An Event Study of Global Oil Prices," Global Economy Journal, De Gruyter, vol. 7(1), pages 1-52, February.
    8. Chen, Jiun-Lin (Alex) & Hwang, Hyoseok (David), 2019. "Business cycle, expected return and momentum payoffs," Finance Research Letters, Elsevier, vol. 29(C), pages 83-89.
    9. H. Khoj & H. Akeel, 2020. "Testing Weak-Form Market Efficiency: The Case of Saudi Arabia," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 10(6), pages 644-653, June.
    10. Cody Yu-Ling Hsiao & Weishun Lin & Xinyang Wei & Gaoyun Yan & Siqi Li & Ni Sheng, 2019. "The Impact of International Oil Prices on the Stock Price Fluctuations of China’s Renewable Energy Enterprises," Energies, MDPI, vol. 12(24), pages 1-17, December.
    11. Fama, Eugene F, et al, 1969. "The Adjustment of Stock Prices to New Information," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 10(1), pages 1-21, February.
    12. Narayan, Paresh Kumar & Gupta, Rangan, 2015. "Has oil price predicted stock returns for over a century?," Energy Economics, Elsevier, vol. 48(C), pages 18-23.
    13. Mensi, Walid & Hammoudeh, Shawkat & Yoon, Seong-Min, 2014. "How do OPEC news and structural breaks impact returns and volatility in crude oil markets? Further evidence from a long memory process," Energy Economics, Elsevier, vol. 42(C), pages 343-354.
    14. Joseph E. Engelberg & Christopher A. Parsons, 2011. "The Causal Impact of Media in Financial Markets," Journal of Finance, American Finance Association, vol. 66(1), pages 67-97, February.
    15. Seema Narayan & Paresh Kumar Narayan, 2017. "Are Oil Price News Headlines Statistically and Economically Significant for Investors?," Journal of Behavioral Finance, Taylor & Francis Journals, vol. 18(3), pages 258-270, July.
    16. Schmidbauer, Harald & Rösch, Angi, 2012. "OPEC news announcements: Effects on oil price expectation and volatility," Energy Economics, Elsevier, vol. 34(5), pages 1656-1663.
    17. Ali, Sajid & Shahzad, Syed Jawad Hussain & Raza, Naveed & Al-Yahyaee, Khamis Hamed, 2018. "Stock market efficiency: A comparative analysis of Islamic and conventional stock markets," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 503(C), pages 139-153.
    18. Marco G.D. Guidi & Alexander Russell & Heather Tarbert, 2006. "The effect of OPEC policy decisions on oil and stock prices," OPEC Energy Review, Organization of the Petroleum Exporting Countries, vol. 30(1), pages 1-18, March.
    19. Fama, Eugene F, 1970. "Efficient Capital Markets: A Review of Theory and Empirical Work," Journal of Finance, American Finance Association, vol. 25(2), pages 383-417, May.
    20. Demirer, RIza & Kutan, Ali M., 2010. "The behavior of crude oil spot and futures prices around OPEC and SPR announcements: An event study perspective," Energy Economics, Elsevier, vol. 32(6), pages 1467-1476, November.
    21. Tim Loughran & Bill Mcdonald, 2011. "When Is a Liability Not a Liability? Textual Analysis, Dictionaries, and 10‐Ks," Journal of Finance, American Finance Association, vol. 66(1), pages 35-65, February.
    22. Matthias W. Uhl, 2014. "Reuters Sentiment and Stock Returns," Journal of Behavioral Finance, Taylor & Francis Journals, vol. 15(4), pages 287-298, October.
    23. Stephen M. Horan, Jeffrey H. Peterson, and James Mahar, 2004. "Implied Volatility of Oil Futures Options Surrounding OPEC Meetings," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3), pages 103-126.
    24. Xiao, Jihong & Hu, Chunyan & Ouyang, Guangda & Wen, Fenghua, 2019. "Impacts of oil implied volatility shocks on stock implied volatility in China: Empirical evidence from a quantile regression approach," Energy Economics, Elsevier, vol. 80(C), pages 297-309.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Loutia, Amine & Mellios, Constantin & Andriosopoulos, Kostas, 2016. "Do OPEC announcements influence oil prices?," Energy Policy, Elsevier, vol. 90(C), pages 262-272.
    2. Antonio Fernandois & Carlos A. Medel, 2020. "Geopolitical tensions, OPEC news, and the oil price: A granger causality analysis," Revista de Analisis Economico – Economic Analysis Review, Universidad Alberto Hurtado/School of Economics and Business, vol. 35(2), pages 57-90, October.
    3. Gupta, Kartick & Banerjee, Rajabrata, 2019. "Does OPEC news sentiment influence stock returns of energy firms in the United States?," Energy Economics, Elsevier, vol. 77(C), pages 34-45.
    4. Rangan Gupta & Chi Keung Marco Lau & Seong-Min Yoon, 2019. "OPEC News Announcement Effect on Volatility in the Crude Oil Market: A Reconsideration," Advances in Decision Sciences, Asia University, Taiwan, vol. 23(4), pages 1-23, December.
    5. Plante, Michael, 2019. "OPEC in the news," Energy Economics, Elsevier, vol. 80(C), pages 163-172.
    6. Spencer, Simon & Bredin, Don, 2019. "Agreement matters: OPEC announcement effects on WTI term structure," Energy Economics, Elsevier, vol. 80(C), pages 589-609.
    7. López, Raquel, 2018. "The behaviour of energy-related volatility indices around scheduled news announcements: Implications for variance swap investments," Energy Economics, Elsevier, vol. 72(C), pages 356-364.
    8. Reboredo, Juan C. & Wen, Xiaoqian, 2015. "Are China’s new energy stock prices driven by new energy policies?," Renewable and Sustainable Energy Reviews, Elsevier, vol. 45(C), pages 624-636.
    9. Mensi, Walid & Hammoudeh, Shawkat & Yoon, Seong-Min, 2014. "How do OPEC news and structural breaks impact returns and volatility in crude oil markets? Further evidence from a long memory process," Energy Economics, Elsevier, vol. 42(C), pages 343-354.
    10. Mensi, Walid & Hammoudeh, Shawkat & Nguyen, Duc Khuong & Yoon, Seong-Min, 2014. "Dynamic spillovers among major energy and cereal commodity prices," Energy Economics, Elsevier, vol. 43(C), pages 225-243.
    11. Liu, Chang & Liu, Yuan & Zhang, Dayong & Xie, Chunping, 2022. "The capital market responses to new energy vehicle (NEV) subsidies: An event study on China," Energy Economics, Elsevier, vol. 105(C).
    12. An, Suwei, 2023. "Essays on incentive contracts, M&As, and firm risk," Other publications TiSEM dd97d2f5-1c9d-47c5-ba62-f, Tilburg University, School of Economics and Management.
    13. Niu, Zibo & Liu, Yuanyuan & Gao, Wang & Zhang, Hongwei, 2021. "The role of coronavirus news in the volatility forecasting of crude oil futures markets: Evidence from China," Resources Policy, Elsevier, vol. 73(C).
    14. Abdi, Farshid & Kormanyos, Emily & Pelizzon, Loriana & Getmansky, Mila & Simon, Zorka, 2021. "Market impact of government communication: The case of presidential tweets," SAFE Working Paper Series 314, Leibniz Institute for Financial Research SAFE, revised 2021.
    15. Blankespoor, Elizabeth & deHaan, Ed & Marinovic, Iván, 2020. "Disclosure processing costs, investors’ information choice, and equity market outcomes: A review," Journal of Accounting and Economics, Elsevier, vol. 70(2).
    16. Gupta, Rangan & Yoon, Seong-Min, 2018. "OPEC news and predictability of oil futures returns and volatility: Evidence from a nonparametric causality-in-quantiles approach," The North American Journal of Economics and Finance, Elsevier, vol. 45(C), pages 206-214.
    17. Remzi Uctum & Georges Prat, 2021. "Modeling ex-ante risk premia in the oil market," Post-Print hal-03513121, HAL.
    18. Pushpanjali Kaul & Sangeeta Arora, 2022. "Reinventing a brand’s identity: effect of name and logo announcements on the stock price of Indian banks," Journal of Brand Management, Palgrave Macmillan, vol. 29(3), pages 258-270, May.
    19. Thai-Ha Le & Donghyun Park & Cong-Phu-Khanh Tran & Binh Tran-Nam, 2018. "The Impact of the Hai Yang Shi You 981 Event on Vietnam’s Stock Markets," Journal of Emerging Market Finance, Institute for Financial Management and Research, vol. 17(3_suppl), pages 344-375, December.
    20. Yue Liu & Hao Dong & Pierre Failler, 2019. "The Oil Market Reactions to OPEC’s Announcements," Energies, MDPI, vol. 12(17), pages 1-15, August.

    More about this item

    Keywords

    Bursa Malaysia; OPEC; event study; machine learning; news sentiment; oil and gas industry;
    All these keywords.

    JEL classification:

    • C88 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Other Computer Software
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ukm:jlekon:v:55:y:2021:i:3:p:1-21. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Muhammad Asri Abd Ghani (email available below). General contact details of provider: https://edirc.repec.org/data/feukmmy.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.