Financial press and stock markets in times of crisis

This paper investigates the relationship between negative news in financial newspapers and stock markets in times of global crisis, such as the 2008/2009 period. We analysed one year of front page banner headlines of three financial newspapers, such as the Wall Street Journal, Financial Times, and Il Sole24ore and created an index of bad news at a daily base. We examined the influence of bad news both on market volatility and dynamic correlation of American, Britain and Italian stock markets to look at the impact of bad news on global investment strategies. Our results show that press and markets co-influenced each other in generating market volatility. The three newspapers showed significant differences in their stance on the crisis, with Financial Times more pessimistic. Our results also show that Wall Street Journal bad news had higher predictability value for the correlation between US and the foreign markets. This confirms the international influence of Wall Street Journal.