Search Results
Working Paper
What's the Story? A New Perspective on the Value of Economic Forecasts
We apply textual analysis tools to measure the degree of optimism versus pessimism of the text that describes Federal Reserve Board forecasts published in the Greenbook. The resulting measure of Greenbook text sentiment, ?Tonality,? is found to be strongly correlated, in the intuitive direction, with the Greenbook point forecast for key economic variables such as unemployment and inflation. We then examine whether Tonality has incremental power for predicting unemployment, GDP growth, and inflation up to four quarters ahead. We find it to have significant and substantive predictive power for ...
Working Paper
The Interactions of Social Norms about Climate Change: Science, Institutions and Economics
We study the evolution of interest in climate change among different actors within the population and how the interest of these actors affects one another. First, we document the evolution of interest for each actor individually, and then we provide a model of cross-influences between them. We estimate this model using a Vector Autoregression (VAR). We measure interest among the general public, the European Parliament, central banks, general interest science journals, and economics journals by creating a Climate Change Index (CCI) based on mentions of climate change in these domains. Except ...
Working Paper
News versus Sentiment : Predicting Stock Returns from News Stories
This paper uses a dataset of more than 900,000 news stories to test whether news can predict stock returns. We measure sentiment with a proprietary Thomson-Reuters neural network. We find that daily news predicts stock returns for only 1 to 2 days, confirming previous research. Weekly news, however, predicts stock returns for one quarter. Positive news stories increase stock returns quickly, but negative stories have a long delayed reaction. Much of the delayed response to news occurs around the subsequent earnings announcement.
Working Paper
Sentiment in Central Banks' Financial Stability Reports
Using the text of financial stability reports (FSRs) published by central banks, we analyze the relation between the financial cycle and the sentiment conveyed in these official communications. To do so, we construct a dictionary tailored specifically to a financial stability context, which assigns positive and negative connotations based on the sentiment conveyed by words in FSRs. With this dictionary, we construct a financial stability sentiment (FSS) index. Using a panel of 35 countries for the sample period between 2005 and 2015, we find that central banks' FSS indexes are mostly driven ...
Discussion Paper
A Peek behind the Curtain of Bank Supervision
Since the financial crisis, bank regulatory and supervisory policies have changed dramatically both in the United States (Dodd-Frank Wall Street Reform and Consumer Protection Act) and abroad (Third Basel Accord). While these shifts have occasioned much debate, the discussion surrounding supervision remains limited because most supervisory activity? both the amount of supervisory attention and the demands for corrective action by supervisors?is confidential. Drawing on our recent staff report ?Parsing the Content of Bank Supervision,? this post provides a peek behind the scenes of bank ...
Working Paper
Corporate Disclosure: Facts or Opinions?
A large body of literature documents the link between textual communication (e.g., news articles, earnings calls) and firm fundamentals, either through pre-defined “sentiment” dictionaries or through machine learning approaches. Surprisingly, little is known about why textual communication matters. In this paper, we take a step in that direction by developing a new methodology to automatically classify statements into objective (“facts”) and subjective (“opinions”) and apply it to transcripts of earnings calls. The large scale estimation suggests several novel results: (1) Facts ...
Quantifying the Beige Book’s “Soft” Data
Some economists believe anecdotal findings in the Beige Book are inferior to hard economic data. This analysis suggests the report’s ‘soft’ content is actually quite firm.
Working Paper
PEAD.txt: Post-Earnings-Announcement Drift Using Text
We construct a new numerical measure of earnings announcement surprises, standardized unexpected earnings call text (SUE.txt), that does not explicitly incorporate the reported earnings value. SUE.txt generates a text-based post-earnings announcement drift (PEAD.txt) larger than the classic PEAD and can be used to create a profitable trading strategy. Leveraging the prediction model underlying SUE.txt, we propose new tools to study the news content of text: paragraph-level SUE.txt and paragraph classification scheme based on the business curriculum. With these tools, we document many ...
Working Paper
Deciphering Federal Reserve Communication via Text Analysis of Alternative FOMC Statements
We apply a natural language processing algorithm to FOMC statements to construct a new measure of monetary policy stance, including the tone and novelty of a policy statement. We exploit cross-sectional variations across alternative FOMC statements to identify the tone (for example, dovish or hawkish), and contrast the current and previous FOMC statements released after Committee meetings to identify the novelty of the announcement. We then use high-frequency bond prices to compute the surprise component of the monetary policy stance. Our text-based estimates of monetary policy surprises are ...
Working Paper
Integrating Prediction and Attribution to Classify News
Recent modeling developments have created tradeoffs between attribution-based models, models that rely on causal relationships, and “pure prediction models†such as neural networks. While forecasters have historically favored one technology or the other based on comfort or loyalty to a particular paradigm, in domains with many observations and predictors such as textual analysis, the tradeoffs between attribution and prediction have become too large to ignore. We document these tradeoffs in the context of relabeling 27 million Thomson Reuters news articles published between 1996 ...