Correlations and Flow of Information between The New York Times and Stock Markets
arXiv:1707.05778 · doi:10.1016/j.physa.2018.02.154
Abstract
We use Random Matrix Theory (RMT) and information theory to analyze the correlations and flow of information between 64,939 news from The New York Times and 40 world financial indices during 10 months along the period 2015-2016. The set of news was quantified and transformed into daily polarity time series using tools from sentiment analysis. Results from RMT shows that a common factor lead the world indices and news, and even share the same dynamics. Furthermore, the global correlation structure has found preserved when adding white noise, which indicate that correlations are not due to sample size effects. Likewise, we found a lot of information flowing from news to world indices for specific delay, being of practical interest for trading purpose. Our results suggest a deep relationship between news and world indices, and show a situation where news drive world market movements, giving a new evidence to support behavioral finance as the current economic paradigm.
arXiv comment18 pages, 14 figures
References in corpus (21)
- Measuring Information Transfer
- Random Matrix Theories in Quantum Physics: Common Concepts
- Noise Dressing of Financial Correlation Matrices
- Universal and non-universal properties of cross-correlations in financial time series
- A Random Matrix Approach to Cross-Correlations in Financial Data
- Correlation of financial markets in times of crisis
- Evolution of worldwide stock markets, correlation structure and correlation based graphs
- Information flow between stock indices
- Renyi's information transfer between financial time series
- Correlation, Network and Multifractal Analysis of Global Financial Indices
- Transfer Entropy as a Log-likelihood Ratio
- Structure and causality relations in a global network of financial companies
- Quantifying and Modeling Long-Range Cross-Correlations in Multiple Time Series with Applications to World Stock Indices
- Reducing the Bias of Causality Measures
- Measures of globalization based on cross-correlations of world financial indices
- Stability and Hierarchy of Quasi-Stationary States: Financial Markets as an Example
- Compensating asynchrony effects in the calculation of financial correlations
- Spectral Domain of Large Nonsymmetric Correlated Wishart Matrices
- How to quantify the influence of correlations on investment diversification
- Spectral density of a Wishart model for nonsymmetric Correlation Matrices
- Extreme Eigenvalues of Wishart Matrices: Application to Entangled Bipartite System