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News Sentiment: A New Yield Curve Factor

Author

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  • Nina Gotthelf
  • Matthias W. Uhl

Abstract

The authors show that sentiments from newspaper articles can explain and predict movements in the term structure of U.S. government bonds. This effect is stronger at the short end of the curve, coinciding with greater volatility and investors' need to continually reassess the Fed's reaction function. Facing such uncertainty, market participants rely on news and sentiment as a central element in their decision-making process. Considering this dependence, the authors propose a new yield curve factor—news sentiment—that is distinct from the 3 established yield curve factors (level, slope, and curvature) as well as from fundamental macroeconomic variables.

Suggested Citation

  • Nina Gotthelf & Matthias W. Uhl, 2019. "News Sentiment: A New Yield Curve Factor," Journal of Behavioral Finance, Taylor & Francis Journals, vol. 20(1), pages 31-41, January.
    • Handle: RePEc:taf:hbhfxx:v:20:y:2019:i:1:p:31-41
    DOI: 10.1080/15427560.2018.1432620
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    Cited by:

    1. Eugster, Patrick & Uhl, Matthias W., 2024. "Forecasting inflation using sentiment," Economics Letters, Elsevier, vol. 236(C).
    2. Yang, Ann Shawing, 2020. "Misinformation corrections of corporate news: Corporate clarification announcements," Pacific-Basin Finance Journal, Elsevier, vol. 61(C).
    3. Aneeta Elsa Simon & Manu K.S., 2023. "Does Sentiments Impact the Returns of Commodity Derivatives? An Evidence from Multi-commodity Exchange India," Vision, , vol. 27(1), pages 79-92, February.
    4. Mohammad Alomari & Abdel Razzaq Al rababa’a & Ghaith El-Nader & Ahmad Alkhataybeh, 2021. "Who’s behind the wheel? The role of social and media news in driving the stock–bond correlation," Review of Quantitative Finance and Accounting, Springer, vol. 57(3), pages 959-1007, October.
    5. Banerjee, Ameet Kumar & Dionisio, Andreia & Pradhan, H.K. & Mahapatra, Biplab, 2021. "Hunting the quicksilver: Using textual news and causality analysis to predict market volatility," International Review of Financial Analysis, Elsevier, vol. 77(C).
    6. Durand, Robert B. & Khuu, Joyce & Smales, Lee A., 2023. "Lost in translation. When sentiment metrics for one market are derived from two different languages," Journal of Behavioral and Experimental Finance, Elsevier, vol. 39(C).
    7. Audrino, Francesco & Offner, Eric A., 2024. "The impact of macroeconomic news sentiment on interest rates," International Review of Financial Analysis, Elsevier, vol. 94(C).

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