Can Topics in Financial News Impact the Return of Stock Market?——A Research Based on Market Segment

Abstract

Abstract:

The impact of news on the stock market is one of the recent hot research topics. this paper aims to investigate whether latent topics in financial news can impact the return of the stock market. By introducing text mining techniques and Latent Dirichlet Allocation (LDA) classification method, we extract topics' distribution from comprehensive macroeconomics news and research the impact of financial news on the whole market. Then the relationship of financial topics and return in industry level are further discussed. The empirical study confirms that the distribution of financial topics can affect the distribution of sector return. Accordingly an investment strategy of sector allocation based on topics' distribution is constructed and an obviously higher return can be obtained comparing with random strategy.

Key words: financial news topic, stock market, media effect, LDA

Long Wen, Mao Yuanfeng, Guan Lijing, Cui Lingxiao. Can Topics in Financial News Impact the Return of Stock Market?——A Research Based on Market Segment[J]. , 2019, 31(5): 18-27.

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