Mood and the Market: Can Press Reports of Investors' Mood Predict Stock Prices?

Yochi Cohen-Charash, Charles A. Scherbaum, John D. Kammeyer-Mueller, Barry M. Staw

Research output: Contribution to journalArticlepeer-review

13 Scopus citations

Abstract

We examined whether press reports on the collective mood of investors can predict changes in stock prices. We collected data on the use of emotion words in newspaper reports on traders' affect, coded these emotion words according to their location on an affective circumplex in terms of pleasantness and activation level, and created indices of collective mood for each trading day. Then, by using time series analyses, we examined whether these mood indices, depicting investors' emotion on a given trading day, could predict the next day's opening price of the stock market. The strongest findings showed that activated pleasant mood predicted increases in NASDAQ prices, while activated unpleasant mood predicted decreases in NASDAQ prices. We conclude that both valence and activation levels of collective mood are important in predicting trend continuation in stock prices.

Original languageEnglish (US)
Article numbere72031
JournalPloS one
Volume8
Issue number8
DOIs
StatePublished - Aug 28 2013

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