May 2011
Beginner to intermediate
384 pages
12h 28m
English
Content preview from The Handbook of News Analytics in FinanceBecome an O’Reilly member and get unlimited access to this title plus top books and audiobooks from O’Reilly and nearly 200 top publishers, thousands of courses curated by job role, 150+ live events each month,
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4.15 NEWS SENTIMENT USED FOR TRADING OR INVESTING DECISIONS
The value of news media sentiment centers on the timing and quality of the sentiment information as well as its practical applications for trading and investment purposes.
There is also an historical value to news sentiment because the correlation between sentiment data and stock moves may give additional information regarding stock price sensitivity to news at the moment the news is released to the public.
When making trading decisions, the sentiment may indicate a powerful momentum shift that is about to materialize in the trading market.
When making investment decisions, the sentiment may indicate potential moves that could affect the stock price valuation for the long term.
It is very unlikely that the sentiment could be used as the sole variable in making a trading or an investment decision. Pragmatically, an estimate of potential stock price movement should be considered for either trading or investment purposes.
For material news to be absorbed into stock price valuation, it is very unlikely that the market could evaluate the true impact within the first day of the news release. Even so, stock prices react to material news in a very significant manner. On the day of the news release, it is not unusual for average trading volume to grow to more than double the average daily volume and for the stock to move significant percentage points up or down.
As such, that kind of trading activity is very likely to become news ...
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