Reuters Sentiment and Stock Returns

Journal of Behavioral Finance, Vol 15 (4), pp. 287-298, 2014

Posted: 10 Sep 2011 Last revised: 5 Mar 2016

Matthias Uhl

University of Zurich - Department of Banking and Finance

Date Written: December 2, 2014

Abstract

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

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

Matthias Uhl (Contact Author)

University of Zurich - Department of Banking and Finance ( email )

Schönberggasse 1
Zürich, 8001
Switzerland

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