Yes it does. The US stock market shows significant movement in response to the tone of Fed speeches, the day the speech is delivered. Negative speeches depress returns and amplify volatility, and the stock market moves more strongly in response to forward-looking speeches. In contrast, current text quantification techniques fail to exhibit any market impact of speeches. Our study introduces two improvements: i) a sentence-based n-gram analysis that quantifies the connotation of multi-clausal phrases (e.g., ‘a slowdown in business profitability’); and ii) usage of an augmented financial dictionary which incorporates ‘valence shifters’: adjectives, adverbs and conjunctions (e.g., ‘large’, ‘slightly’, ‘although’) which alter the connotation of text but have been ignored in literature. We show that valence shifter usage in Fed speeches is the highest during the Great Recession and the Eurozone crisis,
and that valence shifters are used to inject more positivity in speeches.