TY - JOUR
T1 - Applications of a multivariate Hawkes process to joint modeling of sentiment and market return events
AU - Yang, Steve Y.
AU - Liu, Anqi
AU - Chen, Jing
AU - Hawkes, Alan
N1 - Publisher Copyright:
© 2017 Informa UK Limited, trading as Taylor & Francis Group.
PY - 2018/2/1
Y1 - 2018/2/1
N2 - To investigate the complex interactions between market events and investor sentiment, we employ a multivariate Hawkes process to evaluate dynamic effects among four types of distinct events: positive returns, negative returns, positive sentiment, and negative sentiment. Using both intraday S&P 500 return data and Thomson Reuters News sentiment data from 2008 to 2014, we find: (a) self-excitation is strong for all four types of events at 15 min time scale; (b) there is a significant mutual-excitation between positive returns and positive sentiment and negative returns and negative sentiment; (c) decay of return events is almost twice as fast as sentiment events, which means market prices move faster than investor sentiment changes; (d) positive sentiment shocks tend to generate negative price jumps; and (e) the cross-excitation between positive and negative sentiments is stronger than their self-excitation. These findings provide further understanding of investor sentiment and its intricate interactions with market returns.
AB - To investigate the complex interactions between market events and investor sentiment, we employ a multivariate Hawkes process to evaluate dynamic effects among four types of distinct events: positive returns, negative returns, positive sentiment, and negative sentiment. Using both intraday S&P 500 return data and Thomson Reuters News sentiment data from 2008 to 2014, we find: (a) self-excitation is strong for all four types of events at 15 min time scale; (b) there is a significant mutual-excitation between positive returns and positive sentiment and negative returns and negative sentiment; (c) decay of return events is almost twice as fast as sentiment events, which means market prices move faster than investor sentiment changes; (d) positive sentiment shocks tend to generate negative price jumps; and (e) the cross-excitation between positive and negative sentiments is stronger than their self-excitation. These findings provide further understanding of investor sentiment and its intricate interactions with market returns.
KW - Hawkes process
KW - Investor sentiment
KW - News sentiment
KW - Point process
KW - Return jumps
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U2 - 10.1080/14697688.2017.1403156
DO - 10.1080/14697688.2017.1403156
M3 - Article
AN - SCOPUS:85038363744
SN - 1469-7688
VL - 18
SP - 295
EP - 310
JO - Quantitative Finance
JF - Quantitative Finance
IS - 2
ER -