Does the sentiment expressed by major newspapers about the economy usefully predict stock market returns? To investigate, we employ the Daily News Sentiment Index, constructed from "economics-related news articles from 24 major U.S. newspapers [across] all major regions of the country...with at least 200 words... The Daily News Sentiment Index is constructed as a trailing weighted-average of time series, with weights that decline geometrically with the length of time since article publication." Update frequency is weekly, suggesting use of a 7-day simple moving average (SMA7). We calculate the SMA7 on Sundays and relate this series to weekly S&P 500 Index returns calculated from closes on the following Mondays. Using the specified weekly data series during January 1980 (limited by the sentiment series) through July 2022, we find that:
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