Business News and Business Cycles

65 Pages Posted: 7 Sep 2019 Last revised: 23 Sep 2021

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

Multiple version iconThere are 3 versions of this paper

Date Written: September 1, 2021

Abstract

We propose an approach to measuring the state of the economy via textual analysis of business news. From the full text of 800,000 Wall Street Journal articles for 1984–2017, we estimate a topic model that summarizes business news into interpretable topical themes and quantifies the proportion of news attention allocated to each theme over time. News attention closely tracks a wide range of economic activities and explains 25% of aggregate stock market returns. A text-augmented VAR demonstrates the large incremental role of news text in modeling macroeconomic dynamics. We use this model to retrieve the narratives that underlie business cycle fluctuations.

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, Business News and Business Cycles (September 1, 2021). 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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