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Correlation Between News and Stock Price Based on Stock Market Indices: Can News Classification Be Used as a Tool to Make Better Decisions?
- 1 Amsterdam Business school, University of Amsterdam, Amsterdam, 1018WV, Netherlands
- 2 College of Arts and Science(sas), University of Pennsylvania, Philadelphia, 19104, USA
- 3 Department of Mathematics, University College London, London, WC1E6BT, UK
- 4 Department of electrical and electronic engineering, Hong Kong Polytechnic University, Hong Kong, 999077, China
- 5 College du Leman, Versoix, 1290, Switzerland
* Author to whom correspondence should be addressed.
Abstract
The stock market is influenced by various factors, including news events, economic indicators, and investor sentiment. Understanding the correlation between news and stock price movements interests market participants and researchers. In this paper, we explore the relationship between news sentiment and stock market trends using stock market indices. We employ natural language processing (NLP) techniques to classify news articles and analyze their impact on stock market indices, focusing on the S&P 500 and the Dow Jones Industrial Average. We utilize sentiment analysis and machine learning algorithms, including Random Forest, Loughran-McDonald (2014) Financial Sentiment Word Lists (Extended), and AFINN Lexicon, to predict stock market trends based on news sentiment. Our findings demonstrate that positive news sentiment has a more significant impact on stock prices than negative sentiment. The Random Forest model achieves the highest accuracy, while domain-specific lexicons provide valuable insights into financial news sentiment. However, predicting negative trends remains a challenge across all methods. Our research contributes to the growing knowledge of the relationship between news and stock prices and provides valuable insights for market participants and researchers.
Keywords
Stock market, Natural Language Processing, Machine Learning
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Cite this article
Jin,Z.;Ma,M.;Zhou,Z.;Gan,S.;Min,Y. (2024). Correlation Between News and Stock Price Based on Stock Market Indices: Can News Classification Be Used as a Tool to Make Better Decisions?. Advances in Economics, Management and Political Sciences,82,131-141.
Data availability
The datasets used and/or analyzed during the current study will be available from the authors upon reasonable request.
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Volume title: Proceedings of the 2nd International Conference on Financial Technology and Business Analysis
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