The Trump Sentiment: The Effect of News on the US Stock Market
|Author:||Mgr. Aneta Pinteková|
|Year:||2019 - summer|
|Leaders:|| PhDr. Jiří Kukačka Ph.D.
|Work type:|| Finance, Financial Markets and Banking
|Awards and prizes:|
|Abstract:||This thesis examines how the American economy is affected by the market
sentiment that arises from the news about actions and decisions of the American
President Donald Trump. The news articles are obtained from Reuters for the
period between the 1st of May and the 30th of November 2018, based on which
a sentiment variable is created using natural language processing methods.
Firstly, the impact of Trump sentiment on the returns on the S&P 500 Index
is examined. The results show a positive and statistically significant impact of
sentiment from the previous day on today’s S&P 500 Index return. A statistically significant effect of the sentiment from a week ago is also found, however,
this effect is negative. This result indicates that there is an initial overreaction
to the new information, followed by subsequent market correction to the mean.
Such result is consistent with the findings of the field of behavioural finance,
which incorporates the idea that investor psychology is involved in investment
Secondly, the impact of the news sentiment on the performance of individual
sectors of the American economy, as measured by the returns on S&P 500 sector
indices, is analysed. A statistically significant effect of sentiment on sector index
return is found in the case of Consumer Discretionary, Energy, Finance, Health
Care, Information Technology, Materials, and Industrials sector. On the other
hand, Consumer Staples, Communication Services, Utilities, and Real Estate
sectors are not found to have been significantly impacted by the Trump-related
news sentiment during the analysed time period.