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Macro fundamentals or geopolitical events? A textual analysis of news events for crude oil

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  • Brandt, Michael W.
  • Gao, Lin

Abstract

News about macroeconomic fundamentals and geopolitical events affect crude oil markets differently. Using sentiment scores for a broad set of global news of different types, we find that news related to macro fundamentals have an impact on the oil price in the short run and significantly predict oil returns in the long run. Geopolitical news have a much stronger immediate impact but exhibit no predictability. Moreover, geopolitical news generate more uncertainty and greater trading volume, consistent with a disagreement explanation, while macroeconomic news are associated with subsequent lower trading volume. Finally, we find that news sentiment tracks the statistical releases quite well and can partially predict the future realizations of the economic data.

Suggested Citation

  • Brandt, Michael W. & Gao, Lin, 2019. "Macro fundamentals or geopolitical events? A textual analysis of news events for crude oil," Journal of Empirical Finance, Elsevier, vol. 51(C), pages 64-94.
    • Handle: RePEc:eee:empfin:v:51:y:2019:i:c:p:64-94
    DOI: 10.1016/j.jempfin.2019.01.007
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    More about this item

    Keywords

    Crude oil; News analytics; Sentiment; Information;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing

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