Equity Portfolio Risk (Volatility) Estimation Using Market Information and Sentiment

Text and Context: Language Analytics in Finance

“…First, text contains emotive content that may be useful in assessing sentiment in markets. There are several articles in mainstream journals that deal with this topic, both theoretical and empirical [for example, Admati and Pfleiderer, 2001, DeMarzo et al, 2003, Antweiler and Frank, 2004, Das and Chen, 2007, Tetlock, 2007, Tetlock et al, 2008, Mitra et al, 2008, Leinweber and Sisk, 2010.…”

Daily market news sentiment and stock prices

“…Recently, the role of market news sentiment, in particular machine-driven sentiment signals, and their implication for financial market processes, has captured the attention of both investment practitioners and academics. There is a growing body of research that argues that news items from different sources influence investor sentiment, and hence asset prices, asset price volatility and risk (Tetlock, 2007;Tetlock et al, 2008;Da et al, 2011;Barber and Odean, 2008;diBartolomeo and Warrick, 2005a;Mitra et al, 2008;Dzielinski et al, 2011). Bhattacharya et al (2009) explore news items that came out between 1996 and 2000 on 458 Internet initial public offerings (IPOs) and a matching sample of 458 non-Internet IPOs (a total of 171,488 news items).…”

“…It is widely observed that present financial markets are influenced or rather driven by the influx of critical information in the form of real time unanticipated news along with anticipated company announcements. Recently there has been a surge in studies exploring the relationship between stock price movements and news sentiment (Tetlock, 2007;Barber and Odean, 2008;Mitra et al, 2008;Leinweber and Sisk, 2011;Sinha, 2010;Huynh and Smith, 2013).…”

Machine News and Volatility

“…The empirical analysis includes data from the Global Financial Crisis and other periods of market turbulence to assess the effect of financial news sentiment on stock prices in both normal and extreme market conditions. The relationship between stock price movements and news sentiment has recently been examined by Tetlock (2007), Barber and Odean (2008), Mitra, Mitra and diBartolomeo (2009), Leinweber and Sisk (2012), Sinha (2011), and Huynh and Smith (2013).…”

“…The research on this topic argues that news items from different sources influence investor sentiment, which feeds into asset prices, asset price volatility, and risk (Tetlock, 2007;Tetlock et al, 2008;Da et al, 2011;Barber and Odean, 2008;diBartolomeo and Warrick, 2005;Mitra, Mitra and diBartolomeo, 2009;Dzielinski et al, 2011). The diversification benefits of the information impounded in news sentiment scores provided by RavenPack have been demonstrated by Cahan et al (2009) and Hafez and Xie (2012), who examined its benefits in the context of popular asset pricing models.…”