This website uses cookies to collect usage information in order to offer a better browsing experience. By browsing this site or by clicking on the "ACCEPT COOKIES" button you accept our Cookie Policy.

News Sentiment and Bonds

Alpha Architect

Contributor:
Alpha Architect
Visit: Alpha Architect

By:

PhD, CFA

The post “News Sentiment and Bonds” first appeared on the Alpha Architect Blog.

Investing in US 10-year Yields with News Sentiment

  • Nina Gotthelf and Matthias W. Uhl
  • Journal of Investing, Winter 2018
  • A version of this paper can be found here
  • Want to read our summaries of academic finance papers? Check out our Academic Research Insight category

What are the Research Questions?

Academic literature has documented a news sentiment effect on equities ( here and here ). The authors investigate the following research question:

  1. Does the sentiment derived from media content impact bond market investors?

What are the Academic Insights?

By studying  the sentiment extracted from articles from the entire Thomson Reuters news universe (over 400,000 news sentiment items per month from January 2003 to February 2014, totaling 130 observation months) and by applying two techniques to score sentiment (the ‘bag-of-words’ approach and a dynamic learning algorithm), the authors find the following:

  1. YES- outlooks based on the model containing news sentiment are significant for anticipating 10-year US Treasury yields. As a result, profitable trading strategies can be derived to deliver potential outperformance over the benchmark.

Why does it matter?

This paper adds to the literature that alternative data sets like news sentiment can be additive to a traditional macroeconomic variables based model, even in the fixed income asset class.

Visit Alpha Architect Blog to read the full paper

Disclosure: Alpha Architect

The views and opinions expressed herein are those of the author and do not necessarily reflect the views of Alpha Architect, its affiliates or its employees. Our full disclosures are available here. Definitions of common statistics used in our analysis are available here (towards the bottom).

This site provides NO information on our value ETFs or our momentum ETFs. Please refer to this site.

Disclosure: Interactive Brokers

Information posted on IBKR Traders’ Insight that is provided by third-parties and not by Interactive Brokers does NOT constitute a recommendation by Interactive Brokers that you should contract for the services of that third party. Third-party participants who contribute to IBKR Traders’ Insight are independent of Interactive Brokers and Interactive Brokers does not make any representations or warranties concerning the services offered, their past or future performance, or the accuracy of the information provided by the third party. Past performance is no guarantee of future results.

This material is from Alpha Architect and is being posted with permission from Alpha Architect. The views expressed in this material are solely those of the author and/or Alpha Architect and IBKR is not endorsing or recommending any investment or trading discussed in the material. This material is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

trading top