Business news can do more than report on financial markets; it can predict where they’re headed, according to a new study.
Sophie Boladeras of the University of Auckland reports, “That’s the finding from a new study by University of Auckland finance lecturer Dr. Justin J. Case and Queensland University of Technology’s Professor Adam Clements, who show that utilizing business news articles, specifically those published in The Wall Street Journal, can more accurately forecast stock market volatility than other commonly used methods.
“‘Volatility is a common proxy for financial risk,’ says Dr. Case. ‘By accurately forecasting this risk, investors can take strategic steps to protect their investments before market shifts occur.’
“Using more than 1.1 million Wall Street Journal articles published between January 2000 and December 2022, the researchers analyzed the language used in business reporting and linked it to fluctuations in the S&P 500—the world’s most-watched equities index.
“Their study shows that news text offers a forward-looking, real-time lens on market conditions, delivering more accurate signals about risk than the retrospective data typically used in economic forecasting.”
Read more here.
