June 2016

News versus Sentiment: Predicting Stock Returns from News Stories

Steven L. Heston and Nitish R. Sinha


This paper uses a dataset of more than 900,000 news stories to test whether news can predict stock returns. We measure sentiment with a proprietary Thomson-Reuters neural network. We find that daily news predicts stock returns for only 1 to 2 days, confirming previous research. Weekly news, however, predicts stock returns for one quarter. Positive news stories increase stock returns quickly, but negative stories have a long delayed reaction. Much of the delayed response to news occurs around the subsequent earnings announcement.

Accessible materials (.zip)

Keywords: News, Text Analysis

DOI: http://dx.doi.org/10.17016/FEDS.2016.048

PDF: Full Paper

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Last Update: June 19, 2020