Being on the Field When the Game Is Still Under Way. The Financial Press and Stock Markets in Times of Crisis

This paper looks at the relationship between negative news 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, the Wall Street Journal, Financial Times, and Il Sole24ore to examine the influence of bad news both on stock market volatility and dynamic correlation. Our results show that the press and markets influenced each other in generating market volatility and in particular, that the Wall Street Journal had a crucial effect both on the volatility and correlation between the US and foreign markets. We also found significant differences between newspapers in their interpretation of the crisis, with the Financial Times being significantly pessimistic even in phases of low market volatility. Our results confirm the reflexive nature of stock markets. When the situation is uncertain and unpredictable, market behaviour may even reflect qualitative, big picture, and subjective information such as streamers in a newspaper, whose economic and informative value is questionable.