Applications & Strategies
The application of sophisticated linguistic analysis to news and social media has grown from an area of research to mature product solutions since 2007 news-sentiment. News analytics and news sentiment calculations are now routinely used by both buy-side and sell side in alpha generation and trading execution applications. There is however a good deal of variation in the quality, effectiveness and completeness of currently available solutions.
A large number of companies use news analysis to help them make better business decisions. Academic researchers have become interested in news analysis especially with regards to predicting stock price movements, volatility and traded volume. Provided a set of values such as sentiment and relevance as well as the frequency of news arrivals, it is possible to construct news sentiment scores for multiple asset classes such as equities, Forex, fixed income, and commodities. Sentiment scores can be constructed at various horizons to meet the different needs and objectives of high and low frequency trading strategies, whilst characteristics such as direction and volatility of asset returns as well as the traded volume may be addressed more directly via the construction of tailor-made sentiment scores. Scores are generally constructed as a range of values. For instance, values may range between 0 and 100, where values above and below 50 convey positive and negative sentiment, respectively. Based on such sentiment scores, it should be possible to generate a set of strategies useful for instance within investing, hedging, and order execution.
Read more about this topic: News Analytics
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