EMU-related News and Financial Markets in the Czech Republic, Hungary and Poland

We analyse the impact of news on five financial markets in the Czech Republic, Hungary and Poland using a newly constructed data set in a GARCH framework. Macroeconomic shocks (on GDP, inflation rate, current account and trade balance) are constructed as deviations from expected values. EMU-related political and fiscal news is captured as news dummies. Macroeconomic shocks significantly affect short-term interest rates and, to a lesser extent, other financial variables. Political and fiscal news has an impact on long-term bond yields and exchange rates. News displayed prominently in our media sources has a greater impact on financial markets than other news and, in addition, the sources of news themselves matter. We also discover asymmetric effects of news within markets. Finally, using a pooled GARCH model we find that macroeconomic shocks have the strongest impact on financial markets in Hungary, while political news has the largest influence in both Hungary and Poland.Financial markets, Czech Republic, Hungary, Poland, political news, macroeconomic shocks, European Monetary Union

Two Essays on Investor Sentiment

The body of literature on investor sentiment underlines its impact on future stock returns, with general consensus that investor sentiments and future returns are negatively correlated (Baker and Wurgler, 2006; Brown and Cliff, 2004). This extends to the notion that a bullish investor would expect returns to be above average, while a bearish investor anticipates below-average returns (Brown and Cliff, 2004). The first essay proposes a model to examine the influence of unexpected volatility of investor sentiment on the equity risk premium. Assumptions underpinning the model include risk-averse investors, homogeneous expectations regarding asset returns and price changes, and sentiment-influenced expectations of asset returns. The model also presumes continuous-time stochastic (Weiner) processes for asset returns and sentiment. The developed model is rooted in several principles, including the Efficient Market Hypothesis, Martingale theory, and the impact of uncertain sentiment change on stock returns. Utilizing Thomson Reuters MarketPsych Indices for data analysis, the model tests sentiment metrics against the performance of the S&P 500. The results provide insights into the dynamics of investor sentiment and its impact on equity risk premium, laying the groundwork for further empirical investigation. In the first essay, we evaluate the link between industry tournament incentives and investment inefficiency. We find that firms with higher tournament incentives exhibit higher investment inefficiency. Additionally, cross-sectional tests suggest that these effects operate at least in part through both a financing channel and a monitoring channel. Taken together, our results suggest that industry tournament incentives place pressure on CEOs and affect the efficiency of firm investments. In the second essay, we examines the phenomenon of sentiment transmission across stock markets, focusing on the influence of U.S. investors\u27 sentiment on G7 countries. The study utilizes data from the Global Finance database, including stock indices for G7 countries and two measures of sentiment for the U.S. market: news sentiment and social media sentiment. News sentiment captures the impact of positive and negative news articles on market sentiment, while social media sentiment reflects the influence of social media posts on market sentiment. The analysis employs a vector autoregression (VAR) model and Multivariate GARCH model to understand the interdependence of these variables and how changes in U.S. investors\u27 sentiment affect other markets. The study highlights the increasing prevalence and significant impact of sentiment transmission due to the global interconnectedness of markets, amplified by financial innovations like ETFs. The findings contribute to a better understanding of sentiment transmission and its implications for global financial markets, providing insights for policymakers and market participants

Why ownership pluralism still matters in a multi-platform world

This chapter examines the effects of changing technology on landscapes of media provision and consumption and considers whether the greater choice made possible by digital technology and changing patterns of consumption obviate the need for special interventions to restrict media ownership for the sake of pluralism. News Corporation's bid for BSkyB in 2011 clearly exemplified how, not least in times of technological change, patterns of ownership are shaped by economic and strategic factors. Digitisation has encouraged greater cross-sectoral convergence providing an extra spur towards strategies of diversification and multi-platform expansion in the media industry. Even so, and despite the transition to a more web-connected era, as this chapter argues there remain good grounds for concerns about the power wielded by dominant media organisations in relation to production and circulation of news, ideas and cultural and political values within contemporary societies

How do Securities Laws Influence Affect, Happiness, & Trust?

This Article advocates that securities regulators promulgate rules based upon taking into consideration their impacts upon investors\u27 and others\u27 affect, happiness, and trust. Examples of these impacts are consumer optimism, financial stress, anxiety over how thoroughly securities regulators deliberate over proposed rules, investor confidence in securities disclosures, market exuberance, social moods, and subjective well-being. These variables affect and are affected by traditional financial variables, such as consumer debt, expenditures, and wealth; corporate investment; initial public offerings; and securities market demand, liquidity, prices, supply, and volume. This Article proposes that securities regulators can and should evaluate rules based upon measures of affect, happiness, and trust in addition to standard observable financial variables. This Article concludes that the organic statutes of the United States Securities and Exchange Commission are indeterminate despite mandating that federal securities laws consider efficiency among other goals. This Article illustrates analysis of affective impacts of these financial regulatory policies: mandatory securities disclosures; gun-jumping rules for publicly registered offerings; financial education or literacy campaigns; statutory or judicial default rules and menus; and continual reassessment and revision of rules. These regulatory policies impact and are impacted by investors\u27 and other people\u27s affect, happiness, and trust. Thus, securities regulators can and should evaluate such affective impacts to design effective legal policy

High quality topic extraction from business news explains abnormal financial market volatility

Understanding the mutual relationships between information flows and social activity in society today is one of the cornerstones of the social sciences. In financial economics, the key issue in this regard is understanding and quantifying how news of all possible types (geopolitical, environmental, social, financial, economic, etc.) affect trading and the pricing of firms in organized stock markets. In this article, we seek to address this issue by performing an analysis of more than 24 million news records provided by Thompson Reuters and of their relationship with trading activity for 206 major stocks in the S&P US stock index. We show that the whole landscape of news that affect stock price movements can be automatically summarized via simple regularized regressions between trading activity and news information pieces decomposed, with the help of simple topic modeling techniques, into their "thematic" features. Using these methods, we are able to estimate and quantify the impacts of news on trading. We introduce network-based visualization techniques to represent the whole landscape of news information associated with a basket of stocks. The examination of the words that are representative of the topic distributions confirms that our method is able to extract the significant pieces of information influencing the stock market. Our results show that one of the most puzzling stylized fact in financial economies, namely that at certain times trading volumes appear to be "abnormally large," can be partially explained by the flow of news. In this sense, our results prove that there is no "excess trading," when restricting to times when news are genuinely novel and provide relevant financial information.Comment: The previous version of this article included an error. This is a revised versio

Predicting the Effects of News Sentiments on the Stock Market

Stock market forecasting is very important in the planning of business activities. Stock price prediction has attracted many researchers in multiple disciplines including computer science, statistics, economics, finance, and operations research. Recent studies have shown that the vast amount of online information in the public domain such as Wikipedia usage pattern, news stories from the mainstream media, and social media discussions can have an observable effect on investors opinions towards financial markets. The reliability of the computational models on stock market prediction is important as it is very sensitive to the economy and can directly lead to financial loss. In this paper, we retrieved, extracted, and analyzed the effects of news sentiments on the stock market. Our main contributions include the development of a sentiment analysis dictionary for the financial sector, the development of a dictionary-based sentiment analysis model, and the evaluation of the model for gauging the effects of news sentiments on stocks for the pharmaceutical market. Using only news sentiments, we achieved a directional accuracy of 70.59% in predicting the trends in short-term stock price movement.Comment: 4 page

The Impact of News, Oil Prices, and Global Market Developments on Russian Financial Markets

This paper analyzes the impact of news, oil prices, and international financial market developments on daily returns on Russian bond and stock markets. First, regarding returns, energy news affects returns, while news from the war in Chechnya is not significant. Market volatility does not appear to be sensitive to either type of news. Second, a significant effect of the growth in oil prices on Russian stock returns is detected. Third, the international influence on Russian financial markets depends upon the degree of financial liberalization. The higher the degree of financial liberalization, the stronger is the impact of U.S. stock returns on Russian financial markets. In addition, banking reform and interest rate liberalization efforts seem to dictate the globalization of Russian stock markets, while it is the progress in liberalizing securities markets and non-bank financial institutions that matters more for the globalization of Russian bond markets.http://deepblue.lib.umich.edu/bitstream/2027.42/40042/3/wp656.pd