What makes media sentiment a good indicator of stock price?
News reaches a group of investors and market players in a particular company. When the news is out of the ordinary and unexpected, investors and market players react quickly to protect themselves or to benefit from it. News articles become catalysts which produce an ‘imbalance’ in the market place. Our research suggests that the media sentiment prevails more than anything during the period immediately following the release of the news. That is the period when the ‘public mind’ (i.e., a group of investors and market players with interest in a particular company) is influenced the most by the news. In time, as more news becomes available, it determines a trend of media sentiment which affects the overall sentiment of the public interested in a particular public company.
