Dispersion in news sentiment and corporate bond returns

Maksim Isakin and Xiaoling Pu

International Review of Financial Analysis, 2023, vol. 89, issue C

Abstract: We construct a news sentiment index at the firm level by using textual analysis of news articles and find that dispersion in news sentiment is a significant predictor of corporate bond returns. Bonds of firms with high dispersion in news sentiment have a highly significant average return of 7.38 percent. A portfolio that longs bonds with high dispersion in news sentiments and shorts bonds with low dispersion earns an average biweekly return of 8.53 percent. This finding is in line with an argument that dispersion in news sentiment is a proxy for future cash flow uncertainty.

Keywords: Corporate bonds; Credit risk; News sentiment (search for similar items in EconPapers)
JEL-codes: G12 G32 G33 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:89:y:2023:i:c:s1057521923002776

DOI: 10.1016/j.irfa.2023.102761

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