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NATIONAL BUREAU OF ECONOMIC RESEARCH

NBER Working Papers by Ronen Feldman

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Working Papers

January 2013Which News Moves Stock Prices? A Textual Analysis
with Jacob Boudoukh, Ronen Feldman, Shimon Kogan, Matthew Richardson: w18725
A basic tenet of financial economics is that asset prices change in response to unexpected fundamental information. Since Roll’s (1988) provocative presidential address that showed little relation between stock prices and news, however, the finance literature has had limited success reversing this finding. This paper revisits this topic in a novel way. Using advancements in the area of textual analysis, we are better able to identify relevant news, both by type and by tone. Once news is correctly identified in this manner, there is considerably more evidence of a strong relationship between stock price changes and information. For example, market model R-squareds are no longer the same on news versus no news days (i.e., Roll’s (1988) infamous result), but now are 16% versus 33%; variance r...

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