Financial economic research has extensively documented the fact that the impact of the arrival of negative news on stock prices is more intense than that of the arrival of positive news. The authors of the present study followed an innovative approach based on the utilization of two artificial intelligence algorithms to test that asymmetric response effect. Methods: The first algorithm was used to web-scrape the social network Twitter to download the top tweets of the 24 largest market-capitalized publicly traded companies in the world during the last decade. A second algorithm was then used to analyze the contents of the tweets, converting that information into social sentiment indexes and building a time series for each considered company. After comparing the social sentiment indexes’ movements with the daily closing stock price of individual companies using transfer entropy, our estimations confirmed that the intensity of the impact of negative and positive news on the daily stock prices is statistically different, as well as that the intensity with which negative news affects stock prices is greater than that of positive news. The results support the idea of the asymmetric effect that negative sentiment has a greater effect than positive sentiment, and these results were confirmed with the EGARCH model.
We estimate the long-run relationships among NAFTA capital market returns and
then calculate the weights of a ?time-varying minimum variance portfolio?
that includes the Canadian, Mexican, and USA capital markets between March
2007 and March 2009, a period of intense turbulence in international markets.
Our results suggest that the behavior of NAFTA market investors is not
consistent with that of a theoretical ?risk-averse? agent during periods of
high uncertainty and may be either considered as irrational or attributed to
a possible ?home country bias?. This finding represents valuable information
for portfolio managers and contributes to a better understanding of the
nature of the markets in which they invest. It also has practical
implications in the design of international portfolio investment policies.
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