Data Collection

macroeconomic variables affect market volatility. TAIEX, unemployment rate, inflation rate, consumer confidence index and the index of industrial production are control variables of this study. The data of our dependent variable, VIXTWN, and other control variables are extracted from the Taiwan Economic Journal (TEJ) database.

This study focuses on investigating the relationship between macroeconomic and industrial news variables and market volatility. The research period of the study is January 2007 through December 2017. Market volatility measures the overall volatility of the external financial environment and we will examine how macroeconomic news affect investors’ sentiment. The macroeconomic news articles that we use in this study is extracted from CMoney, the Institutional Investors Investment Decision Supporting System. CMoney has developed a platform that fulfill the demand of professional investment institutions, and assist them in enhancing their investment decision quality.

CMoney include most information that investors require in making investment decisions. As the daily new volume is huge, news article that are firm-specific or containing useless content will be filtered out. Keywords related to major industries and equity markets all over the world will be used to extract useful and related news articles.

The first step of the study is to setup a keyword dictionary identifying major industries in Taiwan and major equity markets all over the world. The major industries are identified according to the “Standard Industrial Classification of R.O.C.”, published by the Directorate General of Budget, Accounting & Statistics of Executive Yuan. The corporation classifies all Taiwanese listed companies into twenty-eight different categories, all categories are listed in Table 3-1.

We look through all categories, we believe that it is difficult to collect news related to other electronic industry and general and other industry. News article rarely mention the word “other” and firms categorized in other industry do not experience industrial fluctuations in the same way. Therefore, these two industries are not included in our keyword dictionary. Moreover, news articles often mentioned the industries in short, in most of the times, the full name of the industry will not be used in the news articles.

Therefore, we read over pieces of financial news articles to identify the abbreviations for different industries. Both the full name and the abbreviations of industries are used to search for related news articles over the targeted period. The list of major industries and their abbreviations are shown in Appendix 1.

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Table 3-1 Standard Industrial Classification of R.O.C.

Apart from the major local industries, we believe that global macroeconomic events would also affect Taiwanese market overall sentiment. We list out major Asian and Global equity markets, we believe that movements in these stock markets would affect sentiment of Taiwanese investors. Major equity markets include Global, US, European, Chinese, Singaporean, Hong Kong, Korean and Japanese market. We carry out keyword search in the way similar to that of industrial news search. The name of major stock markets and their abbreviations are indicated in Appendix 2. According to the result of the keyword search, we notice that reporters rarely mention issues of the Singaporean market. The average number of Singaporean market news collected between 2007 and 2017 is twenty pieces per year. We believe that the information content related to the Singaporean market that Taiwanese investors received are very limited and would not impact general market investors’ sentiment. Therefore, we exclude data of the Singaporean market in our study. The news articles related to these major equity markets will be used for sentiment analysis in the next section.

Standard Industrial Classification

Cement industry Food industry Plastic industry Textile industry Electric machinery

industry

Electrical and cable industry Chemical industry Biotechnology and

medical care industry

Glass and ceramic industry Paper and pulp industry Iron and steel industry Rubber industry

Automobile industry Semiconductor industry Computer and peripheral equipment industry Optoelectronic industry Communications and

internet industry

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The sample period of this study is January 2007 to December 2017. The total number of news articles available in CMoney is 1,170,498. However, news article published between November and December 2015 is missing from the database, therefore, the number of days without any news is 61 days. In this study, data mining technique is used to extract financial news that contain the name or abbreviations of major local industries or global stock markets. The total number of local industrial news and global stock news collected are 979,769 and 77,525 respectively. The quantity of news articles related to local industries and major stock markets are lower in non-trading days and public holidays. The number of days without any search result for local industrial news and global stock market news are 121 days and 422 days respectively. Observations with missing values will be excluded in our analysis.

VIXTWN would only published on trading days, data of non-trading days are excluded as we are not able to observe market volatility. Moreover, we could not observe the relationship between news sentiment and market volatility on days without any keyword search. We exclude observations without search result. The summary of search result is demonstrated in Table 3-2. The annual quantity of news collected for each industry and stock market between 2007 and 2017 is presented in Appendix 3 and Appendix 4 respectively.

Table 3-2 Result of News Search Type of News Period Number of

news collected

Number of days without Search Result

Financial News 2007 – 2017 1,170,498 61

Local Industrial News 2007 – 2017 979,769 121 Global Stock Market News 2007 – 2017 77,525 422

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