MFA RPC news sentiment and stock returns☆

Sentiment embedded in the news from the regular press conference of the Chinese Ministry of Foreign Affairs (MFA RPC News Sentiment) can predict stock returns. MFA RPC is the primary channel through which China elaborates its policies and positions in the international political field. Adopting CNN and the dictionary method, we construct the photo-based and text-based sentiment indices to measure MFA RPC News Sentiment based on the daily sample between August 21, 2018 and July 21, 2023. By examining the predictability of MFA RPC News Sentiment on daily stock returns and using panel data regression, we find that MFA RPC News Sentiment significantly predicts the stock returns of listed companies. A significant heterogeneity exists in companies grouped by their features: technology intensity, financing constraint, industry concentration, and overseas income. MFA RPC News Sentiment embedded in photos and texts act as substitutes for each other. Domestic market investor sentiment and international news attitudes towards China positively regulate the mechanisms of MFA RPC News Sentiment in predicting stock returns.