This is from Sentiment’s Edge by Jason Goepfert. This is one aspect of how markets react to news. And it might be that right now, when everyone is skittish, there is more reaction to negative news than positive news.
One of the areas I’ve spent a fair amount of time on is news-related sentiment. How stocks react to overtly positive or negative news, and what impact that tends to have on the broader market, is a consistent source of good information.
The new blog Sentiment News by the good folks at RavenPack (don’t ask what it costs, it’s not priced for individuals) highlights a study by Macquarie Research highlighting stock performance surrounding positive and negative news.
Some highlights:
- Investors are more likely to react adversely to negative news sentiment than to react favorably to positive news sentiment.
- Negative news sentiment is a stronger leading indicator of future underperformance than positive sentiment is for future outperformance.
- Stocks tend to be underperforming prior to a negative news announcement.
- Stocks tend to rebound after about five days {after negative news}.
- There is no short-term reversal after positive news events.
All of these confirm what I’ve found as well, so they are useful rules of thumb if trading individual stocks or even sectors that are greatly impacted by bellwether stocks.
Source:
How Does The Market React To News?
News Sentiment, June 17, 2009
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