The Structure of Economic News

53 Pages Posted: 7 Sep 2019 Last revised: 24 Sep 2019

See all articles by Leland Bybee

Leland Bybee

Yale School of Management

Bryan T. Kelly

Yale SOM; AQR Capital Management, LLC; National Bureau of Economic Research (NBER)

Asaf Manela

Washington University in St. Louis - John M. Olin Business School

Dacheng Xiu

University of Chicago - Booth School of Business

Date Written: September 1, 2019

Abstract

We propose an approach to measuring the state of the economy via textual analysis of business news. From the full text content of 800,000 Wall Street Journal articles for 1984–2017, we estimate a topic model that summarizes business news as easily interpretable topical themes and quantifies the proportion of news attention allocated to each theme at each point in time. We then use our news attention estimates as inputs into statistical models of numerical economic time series. We demonstrate that these text-based inputs accurately track a wide range of economic activity measures and that they have incremental forecasting power for macroeconomic outcomes, above and beyond standard numerical predictors. Finally, we use our model to retrieve the news-based narratives that underly “shocks” in numerical economic data.

Keywords: Textual analysis, macroeconomic news, attention, Wall Street Journal, volatility, VAR, machine learning

Suggested Citation

Bybee, Leland and Kelly, Bryan T. and Manela, Asaf and Xiu, Dacheng, The Structure of Economic News (September 1, 2019). Available at SSRN: https://ssrn.com/abstract=3446225 or http://dx.doi.org/10.2139/ssrn.3446225

Leland Bybee

Yale School of Management ( email )

135 Prospect Street
P.O. Box 208200
New Haven, CT 06520-8200
United States

Bryan T. Kelly (Contact Author)

Yale SOM ( email )

135 Prospect Street
P.O. Box 208200
New Haven, CT 06520-8200
United States

AQR Capital Management, LLC ( email )

Greenwich, CT
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Asaf Manela

Washington University in St. Louis - John M. Olin Business School ( email )

One Brookings Drive
Campus Box 1133
St. Louis, MO 63130-4899
United States
314-935-9178 (Phone)

HOME PAGE: http://apps.olin.wustl.edu/faculty/manela

Dacheng Xiu

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

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