Journal
JOURNAL OF ECONOMETRICS
Volume 228, Issue 2, Pages 221-243Publisher
ELSEVIER SCIENCE SA
DOI: 10.1016/j.jeconom.2020.07.053
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This paper demonstrates state-of-the-art text sentiment analysis tools and develops a new time-series measure of economic sentiment using economic and financial newspaper articles. The study compares the predictive accuracy of various sentiment analysis models and proposes a more accurate sentiment-scoring model. The research findings show that daily news sentiment is related to consumer sentiment measures and positive sentiment shocks have an impact on macroeconomic variables.
This paper demonstrates state-of-the-art text sentiment analysis tools while developing a new time-series measure of economic sentiment derived from economic and financial newspaper articles from January 1980 to April 2015. We compare the predictive accuracy of a large set of sentiment analysis models using a sample of articles that have been rated by humans on a positivity/negativity scale. The results highlight the gains from combining existing lexicons and from accounting for negation. We also generate our own sentiment-scoring model, which includes a new lexicon built specifically to capture the sentiment in economic news articles. This model is shown to have better predictive accuracy than existing off-the-shelf'' models. Lastly, we provide two applications to the economic research on sentiment. First, we show that daily news sentiment is predictive of movements of survey-based measures of consumer sentiment. Second, motivated by Barsky and Sims (2012), we estimate the impulse responses of macroeconomic variables to sentiment shocks, finding that positive sentiment shocks increase consumption, output, and interest rates and dampen inflation. (c) 2020 Elsevier B.V. All rights reserved.
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