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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4.16 NEWS SENTIMENT SYSTEMS
As the 2006 Online News research of the Pew Internet and American Life Project shows, “when news is online it comes to the public rapidly and in larger amounts than ever before. Today, over 65 million Americans go online to receive critical investment news and information.”
In addition, the regulatory environment of the US financial markets is complex and constantly changing. That fact makes it very difficult for an individual to process the material information available in news reports in a timely manner.
In today's environment, with millions of traders and investors online receiving critical news in real time, the old formulas used for valuing stock prices need serious revisions to incorporate news sentiment as a critical variable.
News sentiment systems help to fill the gap in current stock price valuation formulas, because they can help to determine the extent of the valuation multiple allocated to a particular future earnings per share value to be reflected in the stock price.
As we have seen, not all news is created equal and there isn't an easy way to rapidly evaluate the impact that a particular piece of news may have on a stock price, especially when you add to that the complexity of the legal environment. For instance, based on regulation FD stipulations, it is not very clear if trading on a rumor posted on a website or in a more traditional news media article would not be perceived as insider trading.
Therefore, to add value, news sentiment ...
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