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Published on: October 6, 2023
Cohesiveness in financial news and its relation to market volatility
Matija Piškorec1, Nino Antulov-Fantulin1, Petra Kralj Novak2
1Laboratory for Information Systems, Division of Electronics, Ruđer Bošković Institute, Croatia.
Abstract:
Motivated by recent financial crises, significant research efforts have been put into studying contagion effects and herding behaviour in financial markets. Much less has been said regarding the influence of financial news on financial markets. We propose a novel measure of collective behaviour based on financial news on the Web, the News Cohesiveness Index (NCI), and we demonstrate that the index can be used as a financial market volatility indicator. We evaluate the NCI using financial documents from large Web news sources on a daily basis from October 2011 to July 2013 and analyse the interplay between financial markets and finance-related news. We hypothesise that strong cohesion in financial news reflects movements in the financial markets. Our results indicate that cohesiveness in financial news is highly correlated with and driven by volatility in financial markets.
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