Cohesiveness in financial news and its relation to market volatility

Piškorec, Matija; Antulov-Fantulin, Nino; Kralj Novak, Petra; Mozetič, Igor; Grčar, Miha; Vodenska, Irena; Šmuc, Tomislav (2014) Cohesiveness in financial news and its relation to market volatility. Scientific Reports, 4 . 5038/1-5038/8. ISSN 2045-2322

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Official URL: http://www.nature.com/srep/2014/140522/srep05038/f...

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.

Item Type:

Article

Uncontrolled Keywords:

complex systems; market voatility; financial news

Subjects:

SOCIAL SCIENCES > Information and Communication Sciences

Divisions:

Center for Informatics and Computing

Projects:

Project title	Project leader	Project code	Project type
Machine learning algorithms and their application (Algoritmi strojnog učenja i njihova primjena)-	Dragan Gamberger	098-0982560-2563	MZOS
Forecasting Financial Crises-FOC-II	UNSPECIFIED	255987	FP7
Foundational Research on MULTIlevel comPLEX networks and systems-MULTIPLEX	UNSPECIFIED	317532	FP7
FOC INCO	UNSPECIFIED	297149	FP7