Table Of ContentLecture Notes
in Business Information Processing 135
SeriesEditors
WilvanderAalst
EindhovenTechnicalUniversity,TheNetherlands
JohnMylopoulos
UniversityofTrento,Italy
MichaelRosemann
QueenslandUniversityofTechnology,Brisbane,Qld,Australia
MichaelJ.Shaw
UniversityofIllinois,Urbana-Champaign,IL,USA
ClemensSzyperski
MicrosoftResearch,Redmond,WA,USA
Fethi A. Rabhi
Peter Gomber (Eds.)
Enterprise Applications
and Services
in the Finance Industry
6th International Workshop, FinanceCom 2012
Barcelona, Spain, June 10, 2012
Revised Papers
1 3
VolumeEditors
FethiA.Rabhi
UniversityofNewSouthWales
Sydney,NSW,Australia
E-mail:[email protected]
PeterGomber
Goethe-UniversityFrankfurt
FrankfurtamMain,Germany
E-mail:[email protected]
ISSN1865-1348 e-ISSN1865-1356
ISBN978-3-642-36218-7 e-ISBN978-3-642-36219-4
DOI10.1007/978-3-642-36219-4
SpringerHeidelbergDordrechtLondonNewYork
LibraryofCongressControlNumber:2012956060
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Preface
After the 2008 global crisis, the financial services industry still periodically
dominates the headlines. There are many commonly reported themes revolving
around globalization of markets, rapid adoption of technology, and the emer-
gence of new business models and opportunities. To a large extent, academia
hasnotfollowedthese rapidchangesinanadequateway.“Traditional”business
disciplines(e.g.,financeandeconomics)aswellICT-baseddisciplines(e.g.,soft-
wareengineeringandinformationsystems)arestillonlyconcernedwithstudying
parts of a much larger picture in which there are several elements that are in-
tertwined in complex ways.What is needed is to develop new knowledge in this
area that can underpin multidisciplinary research in a similar way that caused
the emergence of new disciplines such as bioinformatics.
This is the main objective of the workshop series on enterprise applications
and services in the finance industry (FinanceCom). The workshop themes span
multipledisciplines,includingtechnical,services,economic,sociological,andbe-
havioral sciences. We welcome research from any of these disciplines, as well as
cross-disciplinary work. We are open to various levels of analysis and method-
ology. The workshop reflects on technologically enabled opportunities, implica-
tions,andchangesduetotheintroductionofnewbusinessmodelsorregulations
related to the financial services industry and the financial markets.
AftersuccessfulworkshopsinSydney(Australia),Regensburg(Germany,co-
located with ECIS 2005), Montreal (Canada, co-located with ICIS 2007), Paris
(in co-location with ICIS 2008), and Frankfurt, the last workshop took place in
Barcelona on June 10, 2012 (in co-location with ECIS 2012). After a rigorous
selection process, seven publications were selected by the Program Committee
to appear in this volume consisting of internationally renowned researchersand
practitioners.
The keynote speech was delivered by Jorge Yzaguirre Scharfhausen, who is
theHeadofEquityUnitattheBolsasyMercadosEspan˜oles(BME).Heoutlined
thechallengesfinancialexchangesarefacingparticularlyindealingwithanever-
changing regulatory environment. The specifities and characteristics of trading
andpost-tradingintheSpanishmarketwerealsodiscussedindetail.Thekeynote
at the workshop set the stage for the program of the rest of the workshop day,
which focused on three distinct but interrelated areas:(1) role of news and text
analysis,(2)algorithmicandhigh-frequencytrading,and(3)technologyroleand
impact. The contents of these proceedings follow the workshop’s structure.
The first part of these proceedings contains three contributions. In the first
one,MichaelSieringaddressesthetopicofmediasentimentanditsimpactonthe
market.Theoriginalityofthisworkistostudytheinterplaybetweenmediasen-
timent and investor attention. The second contribution by Nicolai Bohn, Fethi
Rabhi, Dennis Kundisch, Lawrence Yao, and Tobias Mutter looks at the topic
VI Preface
of analyzing the impact of news on intra-day prices and gives a review of popu-
lar eventstudy analysis techniques.It then proposes a generalframeworkbased
on a service-oriented architecture that can support researchers and analysts in
conducting such studies. The third one by Michael Siering and Jan Munter-
mann proposes an approach that uses both structured and unstructured data
to support financial decision making. This approach is then evaluated against
the use of each type of data separately from a theoretical and a methodological
perspective.
The second part of these proceedings consists of two papers. The first one is
in the growing field of algorithmic trading. It addresses the question of whether
order submission volumes of algorithmic and human traders follow Newcomb-
Benford’s law (NBL). The second paper by Peter Gomber, Martin Haferkorn,
MarcoLutat,andKaiZimmermannconsidersthe concept of“circuitbreakers,”
which are being implemented in many electronic markets to prevent potential
market failure and crash scenarios.It includes an empirical study of the impact
of circuit breakers in a single market and in an inter-marketset-up.
In the third part, the focus is on IT issues with two contributions. The first
onebyLawrenceYao,FethiRabhi,andMauricePeatisafollow-upofanearlier
paper that proposeda new architecture to facilitate financial market data anal-
ysis called ADAGE. This particular contribution focuses on the performance
aspects of an ADAGE implementation realized using Web service technology.
The second paper is motivated by the emergence of XBRL as a standard for
business and financial reporting, which has been pushed by several recent laws
and regulatoryrequirements.The paper reviewsthe academic literature around
XBRL and highlights the researchissues that need to be further investigated.
Special thanks go to Dennis Kundisch, who helped enormously in getting
this workshop organized from start to finish, although he could not ultimately
participate! We also would like to thank Ralf Gerstner from Springer for his
excellent support in producing this proceedings volume. Finally, we would like
to thank the Program Committee members for helping in the organization of
this event and their tremendous work in providing helpful reviews that clearly
improved the quality of the papers in this volume.
September 2012 Fethi Rabhi
Peter Gomber
Organization
TheFinanceComworkshopranasaparalleleventwiththeEuropeanConference
on Information Systems (ECIS) 2012. It took place at the ESADE Business
School in Barcelona.Financial support by Sirca is greatly acknowledged.
Organizing Committee and Program Chairs
Fethi Rabhi University of New South Wales, Australia
Peter Gomber University of Frankfurt, E-Finance Lab,
Germany
Program Committee
Axel Winkelmann University of Mu¨nster, Germany
Daniel Veit University of Mannheim, Germany
Dirk Neumann University of Freiburg, Germany
Gregor Zellner University of Regensburg, Germany
Helen Paik University of New South Wales, Australia
Maurice Peat SIRCA, Australia
Nikolay Mehandjiev University of Manchester, UK
Oliver Hinz University of Darmstadt, Germany
Rainer Riess Deutsche B¨orse, Germany
Roman Beck University of Frankfurt, Germany
Tim Weitzel University of Bamberg, Germany
Steering Committee
Christof Weinhardt Kalrsruhe Institute of Technology, Germany
Dennis Kundisch University of Paderborn, Germany
Federico Rajola Catholic University of Milan, Italy
Fethi Rabhi University of New South Wales, Australia
Jan Muntermann University of Frankfurt, Germany
Peter Gomber University of Frankfurt, Germany
Ryan Riordan Kalrsruhe Institute of Technology, Germany
Table of Contents
Part I: News and Text Analysis
Investigating the Impact of Media Sentiment and Investor Attention
on Financial Markets ............................................. 3
Michael Siering
Towards Automated Event Studies Using High Frequency News
and Trading Data................................................ 20
Nicolai Bohn, Fethi A. Rabhi, Dennis Kundisch, Lawrence Yao, and
Tobias Mutter
The Role of Misbehavior in Efficient Financial Markets: Implications
for Financial Decision Support..................................... 42
Michael Siering and Jan Muntermann
Part II: Algorithmic and High Frequency Trading
Humans vs. Algorithms – Who Follows Newcomb-Benford’sLaw Better
with Their Order Volume? ........................................ 61
Martin Haferkorn
The Effect of Single-Stock Circuit Breakers on the Quality of
Fragmented Markets ............................................. 71
Peter Gomber, Martin Haferkorn, Marco Lutat, and
Kai Zimmermann
Part III: Technology Role and Impact
A Case Study in Using ADAGE for Compute-Intensive Financial
Analysis Processes ............................................... 91
Lawrence Yao, Fethi A. Rabhi, and Maurice Peat
XBRL: Impacts, Issues and Future Research Directions ............... 112
Niels Mu¨ller-Wickop, Martin Schultz, and Markus Nu¨ttgens
Author Index.................................................. 131
Part I
News and Text Analysis
Investigating the Impact of Media Sentiment
and Investor Attention on Financial Markets
Michael Siering
Goethe University Frankfurt, Grüneburgplatz 1,
60323 Frankfurt, Germany
[email protected]
Abstract. Media sentiment has been shown to be related to stock returns.
However, one prerequisite for this influence has not been taken into account
yet: the question of whether investors actually pay attention to news and the
related financial instruments. Within this study, we close this research gap by
examining the interplay between media sentiment and investor attention.
Thereby, we find that the positive impact of media sentiment on returns is
increased when investor attention is high. Furthermore, we evaluate whether
these variables can be used to forecast future market movements. Although our
results reveal that the obtained forecasting accuracy cannot be achieved by
chance, we conclude that further information has to be included in the
forecasting model to obtain satisfying results.
Keywords: Media Sentiment, Investor Attention, Behavioral Finance.
1 Introduction
Within recent years, the impact of media sentiment on financial markets has been of
great interest. Recent studies have found that sentiment expressed in traditional
mainstream media like newspapers or social media such as blogs and message boards
is related to stock returns [1, 2]. In addition, the question of whether investors are
aware of financial news has also been investigated in order to explain anomalies like
the slow incorporation of new information into stock prices on Fridays [3] or the
processing of news related to economically linked firms [4]. Furthermore, the impact
of an increased number of irrelevant news on the processing of relevant ones has been
examined as well [5].
However, to the best of our knowledge, previous research has neglected the
interplay between investor attention and media sentiment as well as the following
influence on financial markets. Nevertheless, it seems intuitive to take the interaction
between both variables into account: the prerequisite for investors being influenced by
media sentiment is that investors actually notice the news articles published within the
media. Consequently, it can be assumed that a higher level of investor attention leads
to an increased media sentiment impact on financial markets.
Furthermore, the instantaneous influence of media sentiment on financial markets
still remains underexplored: recent studies investigate the impact of media sentiment
F.A. Rabhi and P. Gomber (Eds.): FinanceCom 2012, LNBIP 135, pp. 3–19, 2013.
© Springer-Verlag Berlin Heidelberg 2013
4 M. Siering
with at least a one day delay [2, 6]. In contrast, we show that many news articles are
published during the day. Since new information contained within these news articles
is usually processed within short periods of time [7], it also seems reasonable to
investigate the instantaneous impact of media sentiment. Finally, recent studies also
focus on forecasting future market movements by means of machine learning
techniques in order to cover non-linear relationships [8]. In this context, the
integration of media sentiment and investor attention has also not been analyzed yet.
In this paper, we contribute to the literature in several ways. At first, we investigate
the instantaneous impact of media sentiment and investor attention on stock returns.
Second, we examine the interplay of media sentiment as well as investor attention and
its impact on the following stock market reactions. Third, we forecast future returns
taking into account those variables.
Based on an analysis of the media sentiment related to the Dow Jones Industrial
Average (DJIA), we confirm the impact of media sentiment on DJIA returns and
enhance the previous understanding related to the fact that media sentiment already
has an influence on financial markets at the same day when the corresponding news
are published. Additionally, we find that positive media sentiment has an increased
influence on DJIA returns when investor attention is high. Consequently, when
investors are actually interested in a stock and are aware of the related news articles,
the media sentiment impact on financial markets rises. Related to forecasting future
DJIA returns by means of machine learning techniques, we conclude that the accuracy
that can be obtained is higher compared to results that are achieved by chance.
However, additional information has to be included within the forecasting model to
achieve satisfying results.
The remainder of this paper is structured as follows. At first, we present related
work concerning the influence of media sentiment and investor attention on financial
markets. Thereafter, we outline the data used within our study, derive our sentiment
measure and describe the proxy for quantifying investor attention. Next, we consider
the joint impact of media sentiment and investor attention on DJIA returns.
Thereafter, we evaluate whether future market movements can be forecasted by taking
into account these variables. Finally, we discuss the results and conclude this paper.
2 Related Work
Within previous research, a large number of studies have already considered the
impact of media sentiment and investor attention on financial markets separately. In
this context, the following section provides an overview about the corresponding
research streams. Furthermore, the main results are presented in order to provide a
proper grounding for our study.
2.1 Media Sentiment and Financial Markets
Generally, investors decide to trade because of new fundamental information like
dividend announcements or management decisions [9]. Besides, they may also rely on
expectations that do not follow rational rules [10]. For instance, these expectations
