Newswire tone-overlay commodity portfolios

A. Fernandez-Perez, A.-M. Fuertes, J. Miffre and N. Zhao
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J. Miffre: Audencia Business School

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Abstract: This paper introduces the tone-overlay framework for adjusting traditional commodity signals based on the level of salient optimism or pessimism in commodity newswires. By implementing the novel tone-overlay allocation strategy on 26 commodities using traditional allocation signals, we demonstrate that the resulting long-short portfolios yield substantial performance gains compared to the corresponding plain-vanilla traditional portfolios. Our findings suggest that newswire tone provides short-term predictive power for commodity futures returns, beyond well-known commodity characteristics. The tone-overlay portfolios harness a temporary mispricing that reflects an overreaction of commodity futures prices to commodity-specific newswire tone. The outperformance of the tone overlay strengthens with the salience of the newswire tone, consistent with theories of limited investor attention.

Keywords: Newswire tone-overlay portfolio; Textual analysis; Sentiment; Commodity futures; Tactical allocation; Mispricing; Salience (search for similar items in EconPapers)
Date: 2025-09
Note: View the original document on HAL open archive server: https://hal.science/hal-05143194v1
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Published in Journal of banking & finance = Journal of banking and finance, 2025, 178, pp.107501. ⟨10.1016/j.jbankfin.2025.107501⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-05143194

DOI: 10.1016/j.jbankfin.2025.107501

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