Title :
Impact of Dynamic Corporate News Networks on Asset Return and Volatility
Author :
Creamer, German G. ; Ren, Yi ; Nickerson, Jeffrey V.
Author_Institution :
Castle Point on Hudson, Stevens Inst. of Technol., Hoboken, NJ, USA
Abstract :
This paper analyzes the relationship between asset return, volatility and the centrality indicators of a corporate news network conducting a longitudinal network analysis. We build a sequence of daily corporate news network for the period 2005-2011 using companies of the STOXX 50 index as nodes, the weights of the edges are the sum of the number of news items with the same topic by every pair of companies identified by the topic model methodology. The STOXX 50 includes the top 50 European companies by level of capitalization. We performed the Granger causality test and the Brownian distance covariance test of independence among several measures of centrality, return and volatility. We found that the average eigenvector centrality of the corporate news networks at different points of time has an impact on return and volatility of the STOXX 50 index. Likewise, return and volatility of the STOXX 50 index also has an effect on average eigenvector centrality. These results are more significant during the most important period of the recent financial crisis (January 2008-March 2009). So, we observe that there is a dynamic process that affects and is affected by return, volatility, and centrality. The causality tests suggest it is possible to improve the prediction of return and volatility by extracting and analyzing a network based on the common topics of news stories.
Keywords :
data mining; eigenvalues and eigenfunctions; financial data processing; forecasting theory; multi-agent systems; network theory (graphs); statistical testing; stock markets; text analysis; Brownian distance covariance test; Granger causality test; STOXX 50 index; agent based economics; asset return; asset volatility; average eigenvector centrality; causality tests; centrality indicators; daily corporate news network; dynamic corporate news networks; dynamic process; financial crisis; financial forecasting; link mining; longitudinal network analysis; social networks; text analysis; Analytical models; Biological system modeling; Companies; Correlation; Economics; Indexes; Social network services; Agent based economics; common topics; financial forecasting; link mining; social networks; text analysis;
Conference_Titel :
Social Computing (SocialCom), 2013 International Conference on
Conference_Location :
Alexandria, VA
DOI :
10.1109/SocialCom.2013.121