Presidential Communication and Its Impact on the Mexican Stock Market: Evidence Using a Sentiment Analysis Approach

Abstract

This research paper addresses the impact of the positive or negative polarity of the presidential messages contained in the stenographic version of the daily conferences issued by the president of Mexico, obtained by means of semantic and machine learning text mining techniques, on the performance of the Mexican Stock Exchange’s Price and Quotations Index (Índice de Precios y Cotizaciones-IPC). Our results provide evidence of the existence of a negative and significant relationship of the polarity of presidential messages with IPC performance, i.e., as the positive polarity of messages increases, IPC performance decreases.

Keywords:

• Presidential communication
• political risk
• sentiment analysis
• stock market
• text mining

JEL Classification:

• G11
• G12
• G41

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1 A comparison is made of the budget spent on social communication and advertising services by the federal government in the first year of government of the last three presidential administrations in Mexico. In 2007 for Felipe Calderón Hinojosa (FCH), the expenditure in this area was 6,676 million pesos, for 2013 with Enrique Peña Nieto (EPN) 8,873 million pesos and for 2019 with Andrés Manuel López Obrador (AMLO) 3,084 million pesos. Figures updated to December 2019 with the National Consumer Price Index (INPC for its Spanish acronym) base July 2018. Source: for 2007 figure, document of the President’s Fifth Government Report, p.49, and for 2013 and 2019 figures, document of the Second Government Report 2019-2020, statistical annex pp.77.

2 Analysis carried out in Mexico’s Reforma newspaper through the website www.reforma.com, both in the online version and in the printed version, includes the monthly average number of mentions in articles, photos, videos, audio graphics, opinion and cartoons of each of the last three presidents of Mexico in the first two years of their six-year term, with the following search criteria: Calderón, Peña, Obrador. An average of 113 mentions were counted for FCH, 90 for EPN and 130 for AMLO.

3 Source: https://morningconsult.com/global-leader-approval/#section-2.

4 Stenography is the writing technique in which certain special signs and abbreviations are used to transcribe everything someone says at the same speed at which they speak, like shorthand (Oxford Languages). In Mexico, the stenographic versions of the sessions of the Congress of the Union are particularly used, which are defined as the punctual and faithful transcription of what is expressed verbally by the members of the Board of Directors or by the speakers in the tribune in the plenary sessions during the celebration of the ordinary and extraordinary periods, Permanent Commission, and solemn sessions. Definition obtained from: https://www.senado.gob.mx/64/version_estenografica.

5 The S&P 500 is chosen as representative of the world stock market due to its greater age and high correlation with more recent world indexes such as the MSCI world index.

6 Yahoo Answers was a question-and-answer platform for the Yahoo user community from June 2005 until it ceased operations in May 2021.

7 The usual measurement metrics for evaluating the performance of a machine learning model are, among others: precision, recall, accuracy, confusion matrix and F1 score. The latter is a combined measure of completeness and accuracy.

8 More information about the methodology used to construct these indicators and the data sources used, can be found in Kaufmann et al. (2011).