Sometimes News Sentiment Drives the Market, Sometimes It is Only Reacting

According to a new paper, news sentiment sometimes drives the stock market, and sometimes reacts to it. Specifically, news drives market prices during periods of upheaval (debt crises, Brexit and Covid-19 to name a few). Sentiment reports on market action - after the fact - during less volatile times.

Spillover between investor sentiment and volatility: The role of social media by Ni Yang (Auckland University of Technology), Adrian Fernandez-Perez (Auckland University of Technology) and Ivan Indriawan (University of Adelaide)