High-Frequency News Sentiment and Its Application to Forex Market Prediction

In Proceedings of the 54th Hawaii International Conference on System Sciences (HICSS), 2020

10 Pages Posted: 1 Dec 2020

See all articles by Frank Xing

Frank Xing

Nanyang Technological University (NTU)

Duc Hong Hoang

Lund University

Dinh-Vinh Vo

Lund University - School of Economics and Management

Date Written: October 14, 2020

Abstract

Financial news has been identified as an important alternative information source for modeling market dynamics in recent years. While most of the attention goes to stock markets, the foreign exchange (Forex) market, in contrast, is much less studied. Most of the existing text mining research for the Forex market combine news sentiment with other text features, making the contribution of each factor unclear. To this end, we want to study the role of news sentiment exclusively. In particular, we propose a FinBERT-based model to extract high-frequency news sentiment as a 4-dimensional time series. We examine the efficacy of this news sentiment for Forex market prediction without involving any other semantic feature. Experiments show that our model outperforms alternative sentiment analysis approaches and confirm that news sentiment alone may have predictive power for Forex price movements. The sentiment analysis method seems to have a big potential to improve despite that the current predictive power is still weak. The results deepen our understanding of financial text processing systems.

Keywords: Financial sentiment analysis, High frequency, Forex market prediction, Natural language processing

JEL Classification: C53, C63, F31

Suggested Citation

Xing, Frank and Hoang, Duc Hong and Vo, Dinh-Vinh, High-Frequency News Sentiment and Its Application to Forex Market Prediction (October 14, 2020). In Proceedings of the 54th Hawaii International Conference on System Sciences (HICSS), 2020, Available at SSRN: https://ssrn.com/abstract=3711227

Frank Xing (Contact Author)

Nanyang Technological University (NTU) ( email )

S3 B2-A28 Nanyang Avenue
Singapore, 639798
Singapore

Duc Hong Hoang

Lund University ( email )

Box 117
Lund, SC Skane S221 00
Sweden

Dinh-Vinh Vo

Lund University - School of Economics and Management ( email )

Tycho Brahes väg 1,
S-220 07 Lund, 223 63
Sweden

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