Journal of Behavioral Finance, Vol 15 (4), pp. 287-298, 2014
Posted: 10 Sep 2011 Last revised: 5 Mar 2016
Date Written: December 2, 2014
Sentiment from over 3.6 million Reuters news articles is tested in a vector autoregression model framework on its ability to forecast returns of the Dow Jones Industrials stock index. We show that Reuters sentiment can explain and predict changes in stock returns better than macroeconomic factors. We further find that negative Reuters sentiment has more predictive power than positive Reuters sentiment. Trading strategies with Reuters sentiment achieve significant outperformance with high success rates as well as high Sharpe ratios.
Keywords: Reuters sentiment, stock returns, out-of-sample forecasts, vector error correction model
JEL Classification: G11, G14, G17
Suggested Citation: Suggested Citation
Uhl, Matthias, Reuters Sentiment and Stock Returns (December 2, 2014). Journal of Behavioral Finance, Vol 15 (4), pp. 287-298, 2014. Available at SSRN: https://ssrn.com/abstract=1924867 or http://dx.doi.org/10.2139/ssrn.1924867