(Almost) 200 Years of News-Based Economic Sentiment

48 Pages Posted: 29 Oct 2022 Last revised: 23 Mar 2023

See all articles by Jules H. van Binsbergen

Jules H. van Binsbergen

University of Pennsylvania - The Wharton School; National Bureau of Economic Research (NBER)

Svetlana Bryzgalova

London Business School - Department of Finance; Centre for Economic Policy Research (CEPR)

Mayukh Mukhopadhyay

London Business School - Department of Finance

Varun Sharma

Kelley School of Business, Indiana University; Nanyang Business School; London Business School

Date Written: October 28, 2022

Abstract

Using the text of 200 million pages of 13,000 US local newspapers and state-of-the-art machine learning methods, we construct a novel 170-year-long time series measure of economic sentiment at the country and state levels, that expands the existing measures in both the time series (by more than a century) and the cross-section. We show that our measure predicts economic fundamentals such as GDP (both nationally and locally), consumption, and employment growth, even after controlling for commonly-used predictors, and materially predicts monetary policy decisions, particularly during recessions. Our measure is distinct from the information in expert forecasts and leads its consensus value. We use the text to isolate information about current and future events and show that it is the latter that drives our predictability results.

Keywords: Business cycle, macroeconomic news, economic sentiment, monetary policy, textual analysis, machine learning, big data, neural networks

JEL Classification: G1, G4, E2

Suggested Citation

van Binsbergen, Jules H. and Bryzgalova, Svetlana and Mukhopadhyay, Mayukh and Sharma, Varun, (Almost) 200 Years of News-Based Economic Sentiment (October 28, 2022). Available at SSRN: https://ssrn.com/abstract=4261249 or http://dx.doi.org/10.2139/ssrn.4261249

Jules H. Van Binsbergen

University of Pennsylvania - The Wharton School ( email )

3641 Locust Walk
Philadelphia, PA 19104-6365
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

HOME PAGE: http://www.nber.org/people/jules_vanbinsbergen

Svetlana Bryzgalova (Contact Author)

London Business School - Department of Finance ( email )

Sussex Place
Regent's Park
London NW1 4SA
United Kingdom

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Mayukh Mukhopadhyay

London Business School - Department of Finance ( email )

Sussex Place
Regent's Park
London NW1 4SA
United Kingdom

Varun Sharma

Kelley School of Business, Indiana University ( email )

1275 E 10th St
Bloomington, IN 47405
United States
8128377912 (Phone)
47405 (Fax)

HOME PAGE: http://www.sharmav.com

Nanyang Business School ( email )

48 Nanyang Avenue
Singapore, Singapore 639818
Singapore

HOME PAGE: http://dr.ntu.edu.sg/cris/rp/rp02032

London Business School ( email )

Sussex Place
Regent's Park
London, London NW1 4SA
United Kingdom

HOME PAGE: http://www.sharmav.com

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