Event Study and Principal Component Analysis Based on Sentiment Analysis – A Combined Methodology to Study the Stock Market with an Empirical Study


This paper provides an improved method by introducing Sentiment Analysis into the Event Study and Principal Component Analysis. The model is constructed by using the heuristic mean-end analysis. This method enables us to take into investors’ feelings towards related stocks when we study the stock market’s reaction to a given event. This paper investigates the Chinese A-shared market over 2013–2019 to study the influence of rumors and the offsetting impact of rumor clarifications on the stock price. The results indicate that no matter investor sentiment is bullish or bearish, stock price reacts significantly to rumors before as well as when the rumor goes public. Furthermore, clarification offsets the positive abnormal returns caused by rumors with bullish sentiment substantially at a limited level. Still, after five days, it creates a positive effect like the positive rumor does on the stock price. Under the bearish sentiment, clarification brings an insignificant impact on the stock price. The results indicate that the source of rumor may not come from the media and investment decisions established on rumors would be beneficial to investors before as well as after they are published. Moreover, official clarification causes an offset effect, but it is very limited.

Publication DOI: https://doi.org/10.1007/s10796-020-10024-5
Divisions: College of Business and Social Sciences
College of Business and Social Sciences > Aston Business School
College of Business and Social Sciences > Aston Business School > Operations & Information Management
Additional Information: © Springer Nature B.V. 2020. The final publication is available at Springer via http://dx.doi.org/10.1007/s10796-020-10024-5 Funding Information: This work is partially supported by the National Natural Science Foundation of China (Grant No. 61872084) and also VC Research (VCR 0000017).
Uncontrolled Keywords: Event study,Principal component analysis,Rumor analysis,Sentiment analysis,Stock,Theoretical Computer Science,Software,Information Systems,Computer Networks and Communications
Publication ISSN: 1572-9419
Full Text Link:
Related URLs: http://www.scop ... tnerID=8YFLogxK (Scopus URL)
https://link.sp ... 796-020-10024-5 (Publisher URL)
PURE Output Type: Article
Published Date: 2020-10-01
Published Online Date: 2020-06-26
Authors: Xu, Qianwen (ORCID Profile 0000-0003-0360-7193)
Chang, Victor (ORCID Profile 0000-0002-8012-5852)
Hsu, Ching Hsien



Version: Accepted Version

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