Economic news and stock market correlation: A study of the uk market

In this paper, we examine the potential correlation between news and the stock market. Our goal is to match the movement of the market to events that cause the movements. The method employed attempts to produce a time-series of so-called ‘market sentiment ’ from news stories that can be compared directly with time-series of stock markets and, in future, individual stocks. The results gained from a prototype based on this method indicate that news stories relate to movements in the financial market and so such a time-series is possible. We conclude that with systematic improvement of present techniques these results could be used in combination with existing financial prediction techniques, possibly improving the accuracy of such predictions. Background News about financial markets has been treated in a variety of ways. Almeida, Goodhart and Payne [1] have studied the effects on the Dollar/Deutschmark exchange rate of macroeconomic announcements looking specifically at the 15 minutes following the announcement. Andersen and Bollerslev [2] and a