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SUMMARY:The Role of News in Commodity and Equity Markets - Borovkova\, S (
 Vrije Universiteit Amsterdam)
DTSTART:20141015T140000Z
DTEND:20141015T150000Z
UID:TALK55560@talks.cam.ac.uk
CONTACT:Mustapha Amrani
DESCRIPTION:In this talk\, I will give an overview of an exciting new fiel
 d of research: creating news sentiment measures in financial markets (the 
 so-called news analytics) and studying how various aspects of news influen
 ce asset prices. My main focus will be on commodity markets\, but I will a
 lso touch upon equity-related news. I will illuminate how commodity and eq
 uity markets respond to news\, in particular\, to positive and negative ne
 ws sentiment. I will utilize event studies\, Granger causality tests and n
 ews-augmented volatility models to assess the effect of news on the return
 s\, price jumps\, volatilities\, correlations and liquidity.\n\nI will sho
 w that there are significant statistical and economic news effects on asse
 t prices\, leading to potentially profitable trading strategies. For energ
 y commodities\, I will show a great asymmetry in the market's behavior: ne
 gative events are accompanied by much greater losses than the gains surrou
 nding positive events. \n\nI propose a Local News Sentiment Level model fo
 r constructing a running series of news sentiment. Among other effects\, I
  find strong evidence that news sentiment causes price jumps and conclude 
 that market participants trade as some function of aggregated news.\n\nI a
 ugment volatility models (GARCH as well as high-frequency volatility model
 s (HEAVY)) with news sentiment and show that including news sentiment meas
 ures in volatility models results in superior volatility forecasts and can
  improve the assessment of risk.\n\nFinally\, I will discuss how news sent
 iments for various equities or commodities can be combined into a "news se
 ntiment index" and how such index relates to well-know price indices.\n
LOCATION:Seminar Room 2\, Newton Institute Gatehouse
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