Predicting FTSE 100 returns and volatility using sentiment analysis

Mark Johnman; Bruce J Vanstone; Adrian Gepp

doi:10.1111/acfi.12373

Predicting FTSE 100 returns and volatility using sentiment analysis

Mark Johnman^*, Bruce J Vanstone, Adrian Gepp

^*Corresponding author for this work

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Abstract

We investigate the statistical and economic effect of positive and negative sentiment on daily excess returns and volatility in the FTSE 100 index, using business news articles published by the Guardian Media Group between 01/01/2000 and 01/06/2016. The analysis indicates that while business news sentiment derived from articles aimed at retail traders does not influence excess returns in the FTSE 100 index, it does affect volatility, with negative sentiment increasing volatility and positive sentiment reducing it. Further, an ETF‐based trading strategy based on these findings is found to outperform the naïve buy‐and‐hold approach.

Original language	English
Pages (from-to)	253-274
Number of pages	22
Journal	Accounting and Finance
Volume	58
Issue number	S1
Early online date	12 May 2018
DOIs	https://doi.org/10.1111/acfi.12373
Publication status	Published - Nov 2018

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10.1111/acfi.12373

Predicting FTSE 100 Returns and Volatility Using Sentiment AnalysisAccepted author manuscript, 902 KBLicence: Unspecified

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Predicting FTSE 100 returns and volatility using sentiment analysis

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