Business News and Business Cycles

Leland Bybee, Bryan T. Kelly, Asaf Manela and Dacheng Xiu

No 29344, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We propose an approach to measuring the state of the economy via textual analysis of business news. From the full text of 800,000 Wall Street Journal articles for 1984–2017, we estimate a topic model that summarizes business news into interpretable topical themes and quantifies the proportion of news attention allocated to each theme over time. News attention closely tracks a wide range of economic activities and explains 25% of aggregate stock market returns. A text-augmented VAR demonstrates the large incremental role of news text in modeling macroeconomic dynamics. We use this model to retrieve the narratives that underlie business cycle fluctuations.

JEL-codes: E32 G0 (search for similar items in EconPapers)
Date: 2021-10
New Economics Papers: this item is included in nep-big, nep-cwa, nep-fdg and nep-mac
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