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News-based Sentiment Indicators

Author

Listed:
  • Chengyu Huang
  • Sean Simpson
  • Daria Ulybina
  • Agustin Roitman

Abstract

We construct sentiment indices for 20 countries from 1980 to 2019. Relying on computational text analysis, we capture specific language like “fear”, “risk”, “hedging”, “opinion”, and, “crisis”, as well as “positive” and “negative” sentiments, in news articles from the Financial Times. We assess the performance of our sentiment indices as “news-based” early warning indicators (EWIs) for financial crises. We find that sentiment indices spike and/or trend up ahead of financial crises.

Suggested Citation

  • Chengyu Huang & Sean Simpson & Daria Ulybina & Agustin Roitman, 2019. "News-based Sentiment Indicators," IMF Working Papers 2019/273, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2019/273
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    References listed on IDEAS

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    1. Carmen M. Reinhart & Graciela L. Kaminsky, 1999. "The Twin Crises: The Causes of Banking and Balance-of-Payments Problems," American Economic Review, American Economic Association, vol. 89(3), pages 473-500, June.
    2. Carmen M. Reinhart & Graciela L. Kaminsky, 1999. "The Twin Crises: The Causes of Banking and Balance-of-Payments Problems," American Economic Review, American Economic Association, vol. 89(3), pages 473-500, June.
    3. Iñaki Aldasoro & Claudio Borio & Mathias Drehmann, 2018. "Early warning indicators of banking crises: expanding the family," BIS Quarterly Review, Bank for International Settlements, March.
    4. Scott R. Baker & Nicholas Bloom & Steven J. Davis, 2016. "Measuring Economic Policy Uncertainty," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 131(4), pages 1593-1636.
    5. Caprio, Gerard (ed.), 2012. "The Evidence and Impact of Financial Globalization," Elsevier Monographs, Elsevier, edition 1, number 9780123978745.
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    Cited by:

    1. Juan M. Londono & Stijn Claessens & Ricardo Correa, 2024. "Financial Stability Governance and Central Bank Communications," International Journal of Central Banking, International Journal of Central Banking, vol. 20(4), pages 175-220, October.
    2. Stolbov, Mikhail & Shchepeleva, Maria & Karminsky, Alexander, 2022. "When central bank research meets Google search: A sentiment index of global financial stress," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 81(C).
    3. Akalan, Rodi & Brink, Siegrun & Icks, Annette & Wolter, Hans-Jürgen, 2023. "Bedrohungen und Chancen frühzeitig erkennen: Entwicklung eines Früherkennungskonzepts," IfM-Materialien 303, Institut für Mittelstandsforschung (IfM) Bonn.
    4. Borgioli, Stefano & Gallo, Giampiero M. & Ongari, Chiara, 2024. "Financial returns, sentiment and market volatility. A dynamic assessment," Working Paper Series 2999, European Central Bank.
    5. Saiz, Lorena & Ashwin, Julian & Kalamara, Eleni, 2021. "Nowcasting euro area GDP with news sentiment: a tale of two crises," Working Paper Series 2616, European Central Bank.
    6. Gou, Qin & Li, Xingshen & Zhao, Guojun, 2024. "Surges of cross border capital flow: The impact of digital finance," Pacific-Basin Finance Journal, Elsevier, vol. 84(C).

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