Interdependency between the Stock Market and Financial News

Abstract

Stock prices are driven by various factors. In particular, many individual investors who have relatively little financial knowledge rely heavily on the information from news stories when making investment decisions in the stock market. However, these stories may not reflect future stock prices because of the subjectivity in the news; stock prices may instead affect the news contents. This study aims to discover whether it is news or stock prices that have a greater impact on the other. To achieve this, we analyze the relationship between news sentiment and stock prices based on time series analysis using five different classification models. Our experimental results show that stock prices have a bigger impact on the news contents than news does on stock prices.