News Sentiment

42 Pages Posted: 28 Jun 2023

See all articles by Benjamin Golez

Benjamin Golez

University of Notre Dame

Rasa Karapandza

EBS Universität für Wirtschaft und Recht - EBS Business School - Department of Finance and Accounting; New York University (NYU) - New York University, Abu Dhabi

Frederik Wisser

Quoniam Asset Management GmbH; EBS Universität für Wirtschaft und Recht - EBS Business School - Department of Finance and Accounting

Date Written: June 26, 2023

Abstract

We introduce a novel method for training computer algorithms to measure news sentiment. Our approach leverages human-coded sentiment scores from over 200,000 newspaper articles to teach the computer to select words, word combinations, and their linear weights. In an out-of-sample test, examining newspaper articles about US companies, we show that: (i) our news sentiment metric displays a bimodal distribution similar to that observed in the human-coded sentiment scores, (ii) our news metric outperforms the widely-used bag-of-words approach and recent machine learning models in explaining human-coded news sentiment, and (iii) our news sentiment metric serves as a robust predictor for daily stock returns.

Keywords: Textual analysis, Machine Learning, News sentiment, Stock returns

JEL Classification: C53, C55, G11, G12, G14, G17, G41

Suggested Citation

Golez, Benjamin and Karapandza, Rasa and Wisser, Frederik, News Sentiment (June 26, 2023). Available at SSRN: https://ssrn.com/abstract=4492023 or http://dx.doi.org/10.2139/ssrn.4492023

Benjamin Golez

University of Notre Dame ( email )

256 Mendoza College of Business
Notre Dame, IN 46556-5646
United States
(574) 631-1458 (Phone)

HOME PAGE: http://business.nd.edu/BenGolez/

Rasa Karapandza (Contact Author)

EBS Universität für Wirtschaft und Recht - EBS Business School - Department of Finance and Accounting ( email )

Gustav-Stresemann-Ring 3
Wiesbaden, Hessen 65189
Germany

New York University (NYU) - New York University, Abu Dhabi ( email )

PO Box 129188
Abu Dhabi
United Arab Emirates

Frederik Wisser

Quoniam Asset Management GmbH ( email )

Frankfurt
Germany

EBS Universität für Wirtschaft und Recht - EBS Business School - Department of Finance and Accounting ( email )

Gustav-Stresemann-Ring 3
Wiesbaden, Hessen 65189
Germany

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