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Does news tone help forecast oil?

Brian Lucey Orcid Logo, Boru Ren Orcid Logo

Economic Modelling, Volume: 104

Swansea University Author: Boru Ren Orcid Logo

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DOI (Published version): 10.1016/j.econmod.2021.105635

Abstract

Does news tone help forecast oil? In this paper, we study the relationship between news tone and crude oil prices and evaluate the role news tone plays in the ability to forecast oil prices. Specifically, we use a recently developed oil-specific dictionary as well as a widely used general financial...

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Published in: Economic Modelling
ISSN: 0264-9993 1873-6122
Published: Elsevier BV 2021
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URI: https://cronfa.swan.ac.uk/Record/cronfa64715
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spelling 2024-11-27T17:38:15.7882067 v2 64715 2023-10-11 Does news tone help forecast oil? 73321f2d7e2e1c7bd4be9bf6d47fd2a2 0000-0001-8647-9689 Boru Ren Boru Ren true false 2023-10-11 CBAE Does news tone help forecast oil? In this paper, we study the relationship between news tone and crude oil prices and evaluate the role news tone plays in the ability to forecast oil prices. Specifically, we use a recently developed oil-specific dictionary as well as a widely used general financial dictionary, to directly measure the sentiment of 3579 oil news articles from Financial Times for actual oil price forecasting. We find compelling evidence that news tone constructed by the oil dictionary helps forecast monthly oil prices out-of-sample over short horizons, while the news tone constructed by financial dictionary shows no out-of-sample forecasting power at all. We verify and document the economic significance of the best performing forecasting model against the others and a naive buy-hold strategy. We argue that the forecasting power of news tone is data and method dependent, and we underscore the correct use of domain-specific dictionaries in financial sentiment analysis. Journal Article Economic Modelling 104 Elsevier BV 0264-9993 1873-6122 Oil, News, Sentiment, Textual analysis 30 11 2021 2021-11-30 10.1016/j.econmod.2021.105635 http://dx.doi.org/10.1016/j.econmod.2021.105635 COLLEGE NANME Management School COLLEGE CODE CBAE Swansea University 2024-11-27T17:38:15.7882067 2023-10-11T14:41:55.9313776 Faculty of Humanities and Social Sciences School of Management - Accounting and Finance Brian Lucey 0000-0002-4052-8235 1 Boru Ren 0000-0001-8647-9689 2
title Does news tone help forecast oil?
spellingShingle Does news tone help forecast oil?
Boru Ren
title_short Does news tone help forecast oil?
title_full Does news tone help forecast oil?
title_fullStr Does news tone help forecast oil?
title_full_unstemmed Does news tone help forecast oil?
title_sort Does news tone help forecast oil?
author_id_str_mv 73321f2d7e2e1c7bd4be9bf6d47fd2a2
author_id_fullname_str_mv 73321f2d7e2e1c7bd4be9bf6d47fd2a2_***_Boru Ren
author Boru Ren
author2 Brian Lucey
Boru Ren
format Journal article
container_title Economic Modelling
container_volume 104
publishDate 2021
institution Swansea University
issn 0264-9993
1873-6122
doi_str_mv 10.1016/j.econmod.2021.105635
publisher Elsevier BV
college_str Faculty of Humanities and Social Sciences
hierarchytype
hierarchy_top_id facultyofhumanitiesandsocialsciences
hierarchy_top_title Faculty of Humanities and Social Sciences
hierarchy_parent_id facultyofhumanitiesandsocialsciences
hierarchy_parent_title Faculty of Humanities and Social Sciences
department_str School of Management - Accounting and Finance{{{_:::_}}}Faculty of Humanities and Social Sciences{{{_:::_}}}School of Management - Accounting and Finance
url http://dx.doi.org/10.1016/j.econmod.2021.105635
document_store_str 0
active_str 0
description Does news tone help forecast oil? In this paper, we study the relationship between news tone and crude oil prices and evaluate the role news tone plays in the ability to forecast oil prices. Specifically, we use a recently developed oil-specific dictionary as well as a widely used general financial dictionary, to directly measure the sentiment of 3579 oil news articles from Financial Times for actual oil price forecasting. We find compelling evidence that news tone constructed by the oil dictionary helps forecast monthly oil prices out-of-sample over short horizons, while the news tone constructed by financial dictionary shows no out-of-sample forecasting power at all. We verify and document the economic significance of the best performing forecasting model against the others and a naive buy-hold strategy. We argue that the forecasting power of news tone is data and method dependent, and we underscore the correct use of domain-specific dictionaries in financial sentiment analysis.
published_date 2021-11-30T08:30:41Z
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score 11.048366

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