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Mendoza-Urdiales RA, Núñez-Mora JA, Santillán-Salgado RJ, Valencia-Herrera H. Twitter Sentiment Analysis and Influence on Stock Performance Using Transfer Entropy and EGARCH Methods. ENTROPY 2022; 24:e24070874. [PMID: 35885097 PMCID: PMC9324505 DOI: 10.3390/e24070874] [Citation(s) in RCA: 1] [Impact Index Per Article: 0.5] [Reference Citation Analysis] [Abstract] [Track Full Text] [Download PDF] [Figures] [Subscribe] [Scholar Register] [Received: 05/30/2022] [Revised: 06/16/2022] [Accepted: 06/20/2022] [Indexed: 11/16/2022]
Abstract
Financial economic research has extensively documented the fact that the impact of the arrival of negative news on stock prices is more intense than that of the arrival of positive news. The authors of the present study followed an innovative approach based on the utilization of two artificial intelligence algorithms to test that asymmetric response effect. Methods: The first algorithm was used to web-scrape the social network Twitter to download the top tweets of the 24 largest market-capitalized publicly traded companies in the world during the last decade. A second algorithm was then used to analyze the contents of the tweets, converting that information into social sentiment indexes and building a time series for each considered company. After comparing the social sentiment indexes’ movements with the daily closing stock price of individual companies using transfer entropy, our estimations confirmed that the intensity of the impact of negative and positive news on the daily stock prices is statistically different, as well as that the intensity with which negative news affects stock prices is greater than that of positive news. The results support the idea of the asymmetric effect that negative sentiment has a greater effect than positive sentiment, and these results were confirmed with the EGARCH model.
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Affiliation(s)
- Román A. Mendoza-Urdiales
- EGADE Business School, Tecnológico de Monterrey, Mexico City 01389, Mexico; (J.A.N.-M.); (H.V.-H.)
- Correspondence:
| | - José Antonio Núñez-Mora
- EGADE Business School, Tecnológico de Monterrey, Mexico City 01389, Mexico; (J.A.N.-M.); (H.V.-H.)
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