Media sentiment and international asset prices

We investigate the relationship between media sentiment and international equity prices using a new dataset of 4 million news articles published 1991 2015. Three key results emerge. First, robustly predicts future daily returns around world. However, we find sharp contrast effect local that global news: whereas optimism (pessimism) small transitory increase (decrease) in returns, has larger impact on does not reverse short run. Second, affects mainly through investment decisions foreign—rather than local—investors. Third, large variations predominantly happen absence information about fundamentals, suggesting movements capture investors sentiment. Taken together, our findings illustrate role played by foreign driving asset prices.