Analysis of Stock Price Movement Following Financial News Article Release

Abstract

What effect does a financial news article have on stock price? To answer this question we investigate stock price movements within the minutes following financial news releases, broken down by media outlet, time of release and article sentiment. Using a Sharpe ratio (a measure for calculating risk-adjusted return) we demonstrated an abnormal return of 1.81 versus a random dataset of-0.06, indicating significant price movement immediately following article release. Second, we found that articles released through WSJ, Reuters-UK Focus, NYT and FT experienced significant positive returns, whereas articles in Barrons, MarketWatch, Forbes and Bloomberg experienced significant negative returns. Third, we found that articles released at certain times of the day had abnormally high price movements associated with them, more so than could be attributed to random chance. Lastly we discovered a minority of positive news articles trending upwards and suddenly reversing direction following a financial news article release. In one particular case there was a several day period where IBM news articles triggered large price declines. We believe these findings could be used by companies as a form of stock price management.