A multifactor model using large language models and multimodal investor sentiment

Junhuan Zhang, Ziyan Zhang and Jiaqi Wen

International Review of Economics & Finance, 2025, vol. 102, issue C

Abstract: This study constructs multimodal investor sentiment indices using news and image data from the China News Service, covering the period from January 1, 2017, to December 31, 2024. We employ the RoBERTa model for text-based sentiment measurement and the Google Inception(v3) model for image-based sentiment measurement. We use a multimodal semantic correlation fusion model to integrate textual and visual sentiment features. These sentiment indices are categorised as industry-specific and market-wide investor sentiment, enabling separate analyses of their effects on stock markets. Furthermore, we develop a multifactor stock selection model that incorporates these sentiment indices with other microeconomic factors. Our findings demonstrate that multimodal sentiment analysis yields superior predictive accuracy. Industry-specific investor sentiment influences stock market returns, which in turn exacerbates changes in market-wide investor sentiment. Incorporating industry-specific sentiment into the multifactor stock selection model enhances portfolio returns, and combining market-wide sentiment with timing strategies further improves performance.

Keywords: Large language model; Multifactor model; Investor sentiment; Deep learning (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1059056025004447
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:102:y:2025:i:c:s1059056025004447

DOI: 10.1016/j.iref.2025.104281

Access Statistics for this article

International Review of Economics & Finance is currently edited by H. Beladi and C. Chen

More articles in International Review of Economics & Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().