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Media Sentiment and International Asset Prices.
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We assess the impact of media sentiment on international equity prices using more than 4.5 million Reuters articles published across the globe between 1991 and 2015. News sentiment robustly predicts daily returns in both advanced and emerging markets, even after controlling for known determinants of stock prices. But not all news-sentiment is alike. A local (country-specific) increase in news optimism (pessimism) predicts a small and transitory increase (decrease) in local returns. By contrast, changes in global news sentiment have a larger impact on equity returns around the world, which does not reverse in the short run. We also find evidence that news sentiment affects mainly foreign – rather than local – investors: although local news optimism attracts international equity flows for a few days, global news optimism generates a permanent foreign equity inflow. Our results confirm the value of media content in capturing investor sentiment.
Assets (Accounting) --- Mass media --- Investments --- Asset requirements --- Prices. --- Economic aspects. --- Psychological aspects. --- Mass media Economic aspects --- Economic aspects --- Exports and Imports --- Finance: General --- Investments: Stocks --- Macroeconomics --- Current Account Adjustment --- Short-term Capital Movements --- International Financial Markets --- Pension Funds --- Non-bank Financial Institutions --- Financial Instruments --- Institutional Investors --- General Financial Markets: General (includes Measurement and Data) --- Price Level --- Inflation --- Deflation --- International Investment --- Long-term Capital Movements --- Investment & securities --- Finance --- International economics --- Stocks --- Asset prices --- Stock markets --- Capital flows --- Emerging and frontier financial markets --- Financial institutions --- Prices --- Financial markets --- Balance of payments --- Stock exchanges --- Capital movements --- Financial services industry --- United States
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This paper assesses the impact of media sentiment on international equity prices using a dataset of more than 4.5 million Reuters articles published across the globe between 1991 and 2015. Media sentiment robustly predicts daily returns in both advanced and emerging markets, even after controlling for known determinants of stock prices. But not all news sentiment is alike. A local (country-specific) increase in news optimism (pessimism) predicts a small and transitory increase (decrease) in local returns. By contrast, changes in global news sentiment have a larger impact on equity returns around the world, which does not reverse in the short run. Media sentiment affects mainly foreign - rather than local - investors: although local news optimism attracts international equity flows for a few days, global news optimism generates a permanent foreign equity inflow. Our results confirm the value of media content in capturing investor sentiment.
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Evaluating service delivery needs in data-poor environments presents a particularly difficult problem for policymakers. The places where the need for social services are most acute are often the very same places where assessing policy interventions is the most challenging. This paper uses Twitter data to gain insights into service delivery needs in a data-poor environment. Specifically, it examines the development priorities of citizens in the north- western region of Pakistan between 2007 and 2020, using natural language processing techniques (NLP) and sentiment analysis of 9.5 million tweets generated by 20,000 unique Twitter users. The analysis reveals that service delivery priorities in this context are centered on access to education, healthcare, food, and clean water. The findings provide baseline data for future on-the-ground research and development initiatives. In addition, the methodology used in this paper demonstrates both current resources and areas in need of future work in the use of NLP techniques in analyzing social media data in other contexts.
Access and Equity in Basic Education --- Access to Education --- Community Participation in Water Supply and Sanitation --- Education --- Health Service Management and Delivery --- Health, Nutrition and Population --- ICT Applications --- Information and Communication Technologies --- Information Technology --- Natural Language Processing --- Sentiment Analysis --- Service Delivery --- Social Media --- Twitter
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How much of carry trade excess returns can be explained by the presence of disaster risk? To answer this question, we propose a simple structural model that includes both Gaussian and disaster risk premia and can be estimated even in samples that do not contain disasters. The model points to a novel estimation procedure based on currency options with potentially different strikes. We implement this procedure on a large set of countries over the 1996--2008 period, forming portfolios of hedged and unhedged carry trade excess returns by sorting currencies based on their forward discounts. We find that disaster risk premia account for about 25% of expected carry trade excess returns in advanced countries.
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Since the fall of 2008, option smiles have been clearly asymmetric: out-of-the-money currency options point to large expected exchange rate depreciations (appreciations) for high (low) interest rate currencies, suggesting that disaster risk is priced in currency markets. To study the price of disaster risk, we propose a simple structural model that includes both Gaussian and disaster risk and can be estimated even in samples that do not contain disasters. Estimating the model over the 1996 to 2011 period using exchange rate spot, forward, and option data, we obtain a real-time index of world disaster risk premia. We find that disaster risk accounts for more than a third of currency risk premia in advanced countries over the period.
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We investigate the relationship between media sentiment and international equity prices using a new dataset of 4 million news articles published between 1991 and 2015. Three key results emerge. First, news sentiment robustly predicts (future) daily returns around the world. However, we find a sharp contrast between the effect of local news and that of global news: whereas local news optimism (pessimism) predicts a small and transitory increase (decrease) in local equity returns, global news sentiment has a larger impact on returns that does not reverse in the short run. Second, news sentiment affects local prices mainly through the investment decisions of foreign -- rather than local -- investors. Third, large variations in global news sentiment predominantly happen in the absence of new information about fundamentals, suggesting that movements in global sentiment capture variations in investors sentiment. Taken together, our findings illustrate the key role played by foreign news and investors sentiment in driving local asset prices.
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