Does Sentiments Impact the Returns of Commodity Derivatives? An Evidence from Multi-commodity Exchange India

Aneeta Elsa Simon and Manu K.S.

Vision, 2023, vol. 27, issue 1, 79-92

Abstract: The advancements in technology, increased accessibility to various modes and platforms of communication, and increased willingness on the part of participants to share their ideas/opinions has resulted in huge amounts of data on the World Wide Web, hence, easily available to impact decision-making. Furthermore, commodity prices are primarily driven by demand and supply, wherein such news is open to the cognitive thinking of individuals. Thus, using the principles of natural language processing, which combines concepts of linguistics, computer science and artificial intelligence, helps in improving the accuracy of price determination. Therefore, this article aims to examine the relationship between sentiments conveyed through various sources and the performance of India’s largest commodity market, multi-commodity exchange (MCX). The correlation and causation between sentiment scores extracted from such textual content and the daily returns of select commodity derivatives are analysed. The results show varying levels of significance of sentiments on the returns of commodity contracts and imply that there is an increased scope of using such unstructured content in the field of finance.

Keywords: Behavioural Finance; Sentiment Analysis; Lexicon-based Approach; Natural Language Processing; Futures Commodity Contracts (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:sae:vision:v:27:y:2023:i:1:p:79-92

DOI: 10.1177/09722629211004002

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