The Value of News

Vegard Larsen and Leif Thorsrud

No No 6/2015, Working Papers from Centre for Applied Macro- and Petroleum economics (CAMP), BI Norwegian Business School

Abstract: We decompose a major business newspaper according to the topics it writes about, and show that the topics have predictive power for key economic variables and, especially noteworthy, for asset prices. Unexpected innovations to an aggregated news index, derived as a weighted average of the topics with the highest predictive scores, cause large and persistent economic fluctuations, a permanent increase in productivity, and are especially associated with financial markets, credit and borrowing. Unexpected innovations to asset prices, orthogonal to news shocks and labeled as noise, have only temporary positive effects.

Keywords: Machine learning; Latent Dirichlet Allocation (LDA); Bayesian Dynamic Threshold Model; Business Cycles (search for similar items in EconPapers)
Pages: 49 pages
Date: 2015-06
New Economics Papers: this item is included in nep-mac
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Citations: View citations in EconPapers (18)

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Persistent link: https://EconPapers.repec.org/RePEc:bny:wpaper:0034

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