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Contribution Details
| Type | Master's Thesis |
| Scope | Discipline-based scholarship |
| Title | Dynamics of News Sentiment and Equity Market Volatility |
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| Institution | University of Zurich |
| Faculty | Faculty of Business, Economics and Informatics |
| Number of Pages | 51 |
| Date | 2023 |
| Abstract Text | Volatility in equity markets, in particular its excess over the volatility derived from changes in a company’s fundamentals, is a phenomenon that has plagued markets since their inception. In this study we investigate the influence of news sentiment on volatility in equity markets in an attempt to decipher whether this may be the driver of excess volatility. This is achieved by aggregating and then manipulating news sentiment scores from the TRNA dataset into various different formats regressed against volatility data at an index level, across a variety of geographical locations. What we find is that news sentiment is indeed an explanatory variable of volatility. Nevertheless, there remains a significant gap in explaining the rest of the dynamics of volatility. We attempt to fill said gap by developing a multivariate model which additionally includes volume and an auto-regressive element. This model performs significantly better and lends itself to the creation of a successful trading strategy. |
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