Exploring the Relationship Between Free Media Sentiment and Financial Market Performance

Abstract

AbstractThis paper explores the relationship between the role of ‘freedom of media’ and ‘financial markets performance’ by examining sentiment in social media. A global ‘freedom of media’ sentiment index is developed in this study and is analysed against a selection of international financial market indices. A significant relationship is observed between free media sentiment and financial market performance. This paper uses the Valence Aware Dictionary for Sentiment Reasoning to determine free media sentiment. The method used in this study because of its sensitivity to both polarity and intensity of emotion. It was found that there is a significant positive relationship between sentiment regarding the freedom of media and financial market performance, and maps the global distribution of this effect. The impact of the ‘freedom of media’ on financial markets is sometimes greatly underestimated. In order to preserve the sustainability of economic and financial freedom, the role of freedom of media is paramount. If freedom of media protects the rights of individuals, it is reflected through the integrity of the financial markets. The attitude of policy makers towards free media therefore has an influence on portfolio investment dynamics. In this study, a descriptive model is constructed, highlighting the connectedness between the financial markets and the free media. This is achieved by using an OLS methodology. Through the promotion of world peace and free media, a stronger socio-economic environment emerges which fosters robust market performance.KeywordsFree mediaSentiment analysisSocial mediaMarket performance