The Impact of News on Videogame Stock Market Prices and Volatility

• Název práce v češtině: Vliv zpráv na ceny a volatilitu akciového trhu videoherního průmyslu
• Název v anglickém jazyce: The Impact of News on Videogame Stock Market Prices and Volatility
• Klíčová slova anglicky: News, Twitter sentiment, Video games, GARCH, VAR, returns, volatility
• Akademický rok vypsání: 2021/2022
• Typ práce: diplomová práce
• Jazyk práce: angličtina
• Ústav: Institut ekonomických studií (23-IES)
• Vedoucí / školitel: PhDr. František Čech, Ph.D.
• Řešitel: skrytý - zadáno vedoucím/školitelem
• Datum přihlášení: 24.06.2022
• Datum zadání: 24.06.2022
• Datum a čas obhajoby: 21.09.2023 09:00
• Místo konání obhajoby: Opletalova, O109, AULA Michala Mejstříka č. 109
• Datum odevzdání elektronické podoby: 01.08.2023
• Datum proběhlé obhajoby: 21.09.2023
• Oponenti: PhDr. Jiří Kukačka, Ph.D.

Seznam odborné literatury

Bollen, J., Mao, H. and Zeng, X. (2011), “Twitter mood predicts the stock market”, Journal of Computational Science, Vol. 2 No. 1, pp. 1–8.

Engle, R. (2001), “GARCH 101: The Use of ARCH/GARCH Models in Applied Econometrics”, Journal of Economic Perspectives, American Economic Association, Nashville, Vol. 15 No. 4, pp. 157–168.

Łuczuk, P. and Maj, S. (2022), “Can Stock Market Fluctuations Be Predicted? Wig.Games Index Secret on the Example of CD Project”, Social Communication, Vol. 8 No. 1, pp. 8–20.

Luetkepohl, H. (2007), “Econometric Analysis with Vector Autoregressive Models”, European University Institute

Nelson, D.B. (1991), “Conditional Heteroskedasticity in Asset Returns: A New Approach”, Econometrica, [Wiley, Econometric Society], Vol. 59 No. 2, pp. 347–370.

Strauß, N., Vliegenthart, R. and Verhoeven, P. (2018), “Intraday news trading: The reciprocal relationships between the stock market and economic news”, Communication Research, SAGE Publications, Los Angeles, CA, Vol. 45 No. 7, pp. 1054–1077.

Strycharz, J., Strauss, N. and Trilling, D. (2018), “The Role of Media Coverage in Explaining Stock Market Fluctuations: Insights for Strategic Financial Communication”, International Journal of Strategic Communication, Routledge, Philadelphia, Vol. 12 No. 1, pp. 67–85.

Zheludev, I., Smith, R. and Aste, T. (2014), “When Can Social Media Lead Financial Markets?”, Scientific Reports, Springer Nature, pp. 1–12.

Předběžná náplň práce v anglickém jazyce

Motivation:
Evidence from recent years suggests that there is a relationship between reported news and movements on financial markets. According to Strycharz et al. (2018) the topics covered by media are influential on the stock market, both communication about financial news and communication to customer have the influence. Furthermore, it was found that emotionality predicted market fluctuation for some companies and that higher emotionality led to an increase in fluctuation. Other research shows that sentiment analysis of social media can be useful in predicting stock returns. (Bollen et al., 2011)

In December 2020 a polish game developer CD Project released its long-awaited game “Cyberpunk 2077.” The release was preceded with a heavy and ambitious marketing campaign and the game received a lot of attention on the social media which (alongside with the success of previous game) led to the stock price of CD Project steadily increasing. However, shortly before the release, the stock price started to plummet down. This was mainly due to the reviews being published, they stated that the game is in poor technical condition and does not fulfill the promises given by the developer. (Łuczuk and Maj, 2022) Moreover, CD Project was facing a huge fan backlash on the social media.

The goal of the proposed thesis is to explore further the influence of social media and reported news on the value of publicly traded videogame companies. The main focus will be on the potential difference a gaming community can have on this influence, as it can be assumed that gamers are more active and involved with their favorite products on social media as was demonstrated by the case of Cyberpunk.

Hypotheses:
1. Hypothesis #1: The videogame companies stock volatility shows the characteristics of leverage effect, volatility clustering and persistence
2. Hypothesis #2: The videogame companies stock prices change more following specific news/social media sentiment than prices of other types of companies
3. Hypothesis #3: The change in volatility of videogame companies stocks is higher following specific news/social media sentiment than change in stock volatility of other companies

Methodology:
In the thesis the vector autoregression model will be used to model the dependency between media variables and market fluctuations as well as between social media sentiment and market fluctuations. The models for video game industry and others will be compared. Augmented Dickey-Fuller test will be implemented to test for stationarity and Akaike’s information criterion to select appropriate number of lags.

To estimate volatility of the stocks GARCH family models will be used depending on data availability and their performance. Daily log returns will be used as stock price change variable.

This thesis will use daily stock prices to construct daily returns and volatility estimates. Furthermore, to gather information about social media sentiment, Twitter scrape will be utilized. And lastly, to examine the impact of news, the headlines of popular financial and gaming newspapers will be used.

Expected contribution:
The videogame industry is fast-growing and becoming more significant in the financial markets. It is estimated to grow up to $268 billion annually by 2025 up from $178 billion in 2021. (statista, 2021) The previous research has discovered that media and social media can play a role in understanding financial market fluctuations. The company communication (both financial and to customer) can influence its market value.

This thesis will extend upon previous research by exploring these effects within a specific industry and will aim at providing insight to whether this market is more susceptible to the media sentiment. Such knowledge can be helpful to the companies when producing reports as well as potential investors.

Outline:
1. Introduction: motivation for the topic and main goals of the work
2. Literature review: go over the previous research focused on the influence of news and social media on stock values and stability
3. Data: describe the data sources and their processing
4. Methodology: describe and explain the used models and test
5. Empirical analysis: show and comment the results of the analysis, test the hypotheses
6. Conclusion: summarize the main findings and discuss the implementation