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The Value of News

Author

Listed:
  • Vegard H. Larsen

    ()

  • Leif Anders Thorsrud

    ()

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.

Suggested Citation

  • Vegard H. Larsen & Leif Anders Thorsrud, 2015. "The Value of News," Working Papers No 6/2015, Centre for Applied Macro- and Petroleum economics (CAMP), BI Norwegian Business School.
  • Handle: RePEc:bny:wpaper:0034
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    References listed on IDEAS

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    Cited by:

    1. Vegard Høghaug Larsen & Leif Anders Thorsrud, 2018. "Business cycle narratives," Working Papers No 6/2018, Centre for Applied Macro- and Petroleum economics (CAMP), BI Norwegian Business School.
    2. Vegard Høghaug Larsen & Leif Anders Thorsrud, 2017. "Asset returns, news topics, and media effects," Working Papers No 5/2017, Centre for Applied Macro- and Petroleum economics (CAMP), BI Norwegian Business School.
    3. Jochen Lüdering & Peter Tillmann, 2016. "Monetary Policy on Twitter and its Effect on Asset Prices: Evidence from Computational Text Analysis," MAGKS Papers on Economics 201612, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    4. Leif Anders Thorsrud, 2016. "Words are the new numbers: A newsy coincident index of business cycles," Working Paper 2016/21, Norges Bank.
    5. Vegard Høghaug Larsen, 2017. "Components of Uncertainty," Working Papers No 4/2017, Centre for Applied Macro- and Petroleum economics (CAMP), BI Norwegian Business School.
    6. repec:eee:jcecon:v:47:y:2019:i:1:p:111-135 is not listed on IDEAS
    7. repec:jns:jbstat:v:236:y:2016:i:1:p:483-515:n:6 is not listed on IDEAS
    8. David Lenz & Peter Winker, 2018. "Measuring the Diffusion of Innovations with Paragraph Vector Topic Models," MAGKS Papers on Economics 201815, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    9. Lüdering Jochen & Winker Peter, 2016. "Forward or Backward Looking? The Economic Discourse and the Observed Reality," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 236(4), pages 483-515, August.
    10. repec:nse:ecosta:ecostat_2018_505-506_2 is not listed on IDEAS
    11. Lino Wehrheim, 2017. "Economic History Goes Digital: Topic Modeling the Journal of Economic History," Working Papers 177, Bavarian Graduate Program in Economics (BGPE).
    12. Grajzl, Peter & Murrell, Peter, 2019. "Toward understanding 17th century English culture: A structural topic model of Francis Bacon's ideas," Journal of Comparative Economics, Elsevier, vol. 47(1), pages 111-135.
    13. Leif Anders Thorsrud, 2016. "Nowcasting using news topics Big Data versus big bank," Working Papers No 6/2016, Centre for Applied Macro- and Petroleum economics (CAMP), BI Norwegian Business School.

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    Keywords

    Machine learning; Latent Dirichlet Allocation (LDA); Bayesian Dynamic Threshold Model; Business Cycles;

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