Words that Wound: The Impact of Biased Language on News Sentiment and Stock Market Index

This study investigates the impact of biased language, specifically 'Words that Wound,' on sentiment analysis in a dataset of 45,379 South Korean daily economic news articles. Using Word2Vec, cosine similarity, and an expanded lexicon, we analyzed the influence of these words on news titles' sentiment scores. Our findings reveal that incorporating biased language significantly amplifies sentiment scores' intensity, particularly negativity. The research examines the effect of heightened negativity in news titles on the KOSPI200 index using linear regression and sentiment analysis. Results indicate that the augmented sentiment lexicon (Sent1000), which includes the top 1,000 negative words with high cosine similarity to 'Crisis,' more effectively captures the impact of news sentiment on the stock market index than the original KNU sentiment lexicon (Sent0). The ARDL model and Impulse Response Function (IRF) analyses disclose that Sent1000 has a stronger and more persistent impact on KOSPI200 compared to Sent0. These findings emphasize the importance of understanding language's role in shaping market dynamics and investor sentiment, particularly the impact of negatively biased language on stock market indices. The study highlights the need for considering context and linguistic nuances when analyzing news content and its potential effects on public opinion and market dynamics.