Financial Press and Stock Markets in Times of Crisis

Ca' Foscari University of Venice Working Paper No. 04

27 Pages Posted: 6 Jun 2012

See all articles by Roberto Casarin

Roberto Casarin

University Ca' Foscari of Venice - Department of Economics

Flaminio Squazzoni

affiliation not provided to SSRN

Date Written: May 17, 2012

Abstract

This paper investigates the relationship between negative news in financial newspapers and stock markets in times of global crisis, such as the 2008/2009 period. We analyzed one year of front page banner headlines of three financial newspapers, such as the Wall Street Journal, Financial Times, and Il Sole24ore and created an index of bad news at a daily base. We examined the influence of bad news both on market volatility and dynamic correlation of American, Britain and Italian stock markets to look at the impact of bad news on global investment strategies. Our results show that press and markets co-influenced each other in generating market volatility. The three newspapers showed significant differences in their stance on the crisis, with Financial Times more pessimistic. Our results also show that Wall Street Journal bad news had higher predictability value for the correlation between US and the foreign markets. This confirms the international influence of Wall Street Journal.

Keywords: 2008/2009 financial crisis, financial press, bad news, market volatility, dynamic correlation, Wall Street Journal, pessimism

JEL Classification: G14, G15, C58

Suggested Citation

Casarin, Roberto and Squazzoni, Flaminio, Financial Press and Stock Markets in Times of Crisis (May 17, 2012). Ca' Foscari University of Venice Working Paper No. 04, Available at SSRN: https://ssrn.com/abstract=2078868 or http://dx.doi.org/10.2139/ssrn.2078868

Roberto Casarin (Contact Author)

University Ca' Foscari of Venice - Department of Economics ( email )

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Flaminio Squazzoni

affiliation not provided to SSRN

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