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News sentiment in the gold futures market

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  • Smales, Lee A.

Abstract

This article utilises commodity specific news sentiment data provided by Thomson Reuters News Analytics to examine the relationship between news sentiment and returns in the gold futures market over the period 2003–2012. There is an asymmetric response to news releases with negative news sentiment invoking a greater contemporaneous response in returns of gold futures. There is evidence to support the supposition that net trader positions significantly impact the identified sentiment relationship with the effect greatest when traders are holding positions contrary to their natural position; this may be explained by constraints imposed on traders in terms of credit availability, exchange imposed limits, or inventory required for physical settlement. Recession, and associated changes in credit costs, impact the size of net positions and the news sentiment/return relationship.

Suggested Citation

  • Smales, Lee A., 2014. "News sentiment in the gold futures market," Journal of Banking & Finance, Elsevier, vol. 49(C), pages 275-286.
  • Handle: RePEc:eee:jbfina:v:49:y:2014:i:c:p:275-286
    DOI: 10.1016/j.jbankfin.2014.09.006
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. David E. Allen & Michael McAleer & Abhay K. Singh, 2015. "Daily Market News Sentiment and Stock Prices," Documentos de Trabajo del ICAE 2015-11, Universidad Complutense de Madrid, Facultad de Ciencias Económicas y Empresariales, Instituto Complutense de Análisis Económico.
    2. Han, Liyan & Xu, Yang & Yin, Libo, 2017. "Does investor attention matter? The attention-return relation in gold futures market," Economics Discussion Papers 2017-37, Kiel Institute for the World Economy (IfW).
    3. repec:eee:pacfin:v:45:y:2017:i:c:p:186-210 is not listed on IDEAS
    4. repec:taf:quantf:v:16:y:2016:i:12:p:1809-1822 is not listed on IDEAS
    5. Smales, Lee A. & Yang, Yi, 2015. "The importance of belief dispersion in the response of gold futures to macroeconomic announcements," International Review of Financial Analysis, Elsevier, vol. 41(C), pages 292-302.
    6. David E Allen & Michael McAleer & Abhay K Singh, 2017. "An entropy-based analysis of the relationship between the DOW JONES Index and the TRNA Sentiment series," Applied Economics, Taylor & Francis Journals, vol. 49(7), pages 677-692, February.
    7. repec:eee:reveco:v:55:y:2018:i:c:p:21-36 is not listed on IDEAS
    8. Raj Aggarwal & Brian M. Lucey & Fergal A. O'Connor, 2014. "Rationality in Precious Metals Forward Markets: Evidence of Behavioural Deviations in the Gold Markets," The Institute for International Integration Studies Discussion Paper Series iiisdp462, IIIS.
    9. Georgios Bampinas & Theodore Panagiotidis & Christina Rouska, 2018. "Volatility persistence and asymmetry under the microscope: The role of information demand for gold and oil," Working Paper series 18-13, Rimini Centre for Economic Analysis.
    10. O'Connor, Fergal A. & Lucey, Brian M. & Batten, Jonathan A. & Baur, Dirk G., 2015. "The financial economics of gold — A survey," International Review of Financial Analysis, Elsevier, vol. 41(C), pages 186-205.
    11. David E. Allen & Michael McAleer & Abhay K. Singh, 2014. "Machine News and Volatility: The Dow Jones Industrial Average and the TRNA Sentiment Series," Tinbergen Institute Discussion Papers 14-014/III, Tinbergen Institute.
    12. repec:eee:riibaf:v:41:y:2017:i:c:p:461-479 is not listed on IDEAS
    13. repec:eee:finana:v:57:y:2018:i:c:p:57-64 is not listed on IDEAS
    14. repec:wsi:apjorx:v:34:y:2017:i:02:n:s021759591740019x is not listed on IDEAS
    15. Smales, Lee A., 2016. "News sentiment and bank credit risk," Journal of Empirical Finance, Elsevier, vol. 38(PA), pages 37-61.
    16. Khuu, Joyce & Durand, Robert B. & Smales, Lee A., 2016. "Melancholia and Japanese stock returns – 2003 to 2012," Pacific-Basin Finance Journal, Elsevier, vol. 40(PB), pages 424-437.
    17. Jordan, Steven J. & Vivian, Andrew & Wohar, Mark E., 2016. "Can commodity returns forecast Canadian sector stock returns?," International Review of Economics & Finance, Elsevier, vol. 41(C), pages 172-188.
    18. Zheng, Yao, 2015. "The linkage between aggregate investor sentiment and metal futures returns: A nonlinear approach," The Quarterly Review of Economics and Finance, Elsevier, vol. 58(C), pages 128-142.
    19. repec:eee:jbfina:v:90:y:2018:i:c:p:17-31 is not listed on IDEAS
    20. Smales, Lee A., 2015. "Time-variation in the impact of news sentiment," International Review of Financial Analysis, Elsevier, vol. 37(C), pages 40-50.
    21. repec:bla:irvfin:v:17:y:2017:i:3:p:473-477 is not listed on IDEAS

    More about this item

    Keywords

    News sentiment; Futures markets; Trading behaviour; Gold; COMEX; Information;

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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