How News and Market Conditions Relate to Investor Trading in Nokia

Summary

This study examines how different investor groups traded Nokia shares from 2003 to 2008 and compares the roles of market conditions and news. It treats returns and volatility as endogenous factors, while daily news volume and a sentiment measure derived from news serve as exogenous factors. Linear regression and partial correlation analysis are used to assess how these variables relate to trading behavior across investor categories.

The reported relationships vary by group. Government and nonprofit organizations show relatively weak sensitivity to the measured factors and are more associated with news than with returns or volatility. Households and companies are more sensitive overall, with returns and volatility more relevant than news volume and sentiment, respectively. Financial institutions and foreign organizations fall between these patterns. These findings describe associations in one stock and historical period; the document does not establish causal effects or show that news-based signals produce profitable trades. It also provides no coefficient estimates or details about the sentiment method in the supplied text.

Key ideas

• The analysis covers investor trading in Nokia shares during 2003–2008.
• It compares returns and volatility with news volume and a news sentiment measure.
• Linear regression and partial correlation are used to examine group-level relationships.
• Households and companies are more sensitive to the measured factors than government and nonprofit organizations.
• The findings are observational and do not demonstrate causal effects or trading profitability.

Tags

# How news affect the trading behavior of different categories of investors in a financial market


# How news affect the trading behavior of different categories of investors in a financial market









We investigate the trading behavior of a large set of single investors trading the highly liquid Nokia stock over the period 2003-2008 with the aim of determining the relative role of endogenous and exogenous factors that may affect their behavior. As endogenous factors we consider returns and volatility, whereas the exogenous factors we use are the total daily number of news and a semantic variable based on a sentiment analysis of news. Linear regression and partial correlation analysis of data show that different categories of investors are differently correlated to these factors. Governmental and non profit organizations are weakly sensitive to news and returns or volatility, and, typically, they are more correlated with the former than with the latter. Households and companies, on the contrary, are very sensitive to both endogenous and exogenous factors, and volatility and returns are, on average, much more relevant than the number of news and sentiment, respectively. Finally, financial institutions and foreign organizations are intermediate between these two cases, in terms of both the total explanatory power of these factors and their relative importance.

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