Dispersion in news sentiment and corporate bond returns

Maksim Isakin; Xiaoling Pu

doi:10.1016/j.irfa.2023.102761

Dispersion in news sentiment and corporate bond returns

Maksim Isakin
, Xiaoling Pu

Kent State University

Research output: Contribution to journal › Article › peer-review

9 Scopus citations

Abstract

We construct a news sentiment index at the firm level by using textual analysis of news articles and find that dispersion in news sentiment is a significant predictor of corporate bond returns. Bonds of firms with high dispersion in news sentiment have a highly significant average return of 7.38 percent. A portfolio that longs bonds with high dispersion in news sentiments and shorts bonds with low dispersion earns an average biweekly return of 8.53 percent. This finding is in line with an argument that dispersion in news sentiment is a proxy for future cash flow uncertainty.

Original language	English
Article number	102761
Journal	International Review of Financial Analysis
Volume	89
DOIs	https://doi.org/10.1016/j.irfa.2023.102761
State	Published - Oct 1 2023

Keywords

Corporate bonds
Credit risk
News sentiment

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10.1016/j.irfa.2023.102761

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abstract = "We construct a news sentiment index at the firm level by using textual analysis of news articles and find that dispersion in news sentiment is a significant predictor of corporate bond returns. Bonds of firms with high dispersion in news sentiment have a highly significant average return of 7.38 percent. A portfolio that longs bonds with high dispersion in news sentiments and shorts bonds with low dispersion earns an average biweekly return of 8.53 percent. This finding is in line with an argument that dispersion in news sentiment is a proxy for future cash flow uncertainty.",

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AB - We construct a news sentiment index at the firm level by using textual analysis of news articles and find that dispersion in news sentiment is a significant predictor of corporate bond returns. Bonds of firms with high dispersion in news sentiment have a highly significant average return of 7.38 percent. A portfolio that longs bonds with high dispersion in news sentiments and shorts bonds with low dispersion earns an average biweekly return of 8.53 percent. This finding is in line with an argument that dispersion in news sentiment is a proxy for future cash flow uncertainty.

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KW - Credit risk

KW - News sentiment

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Dispersion in news sentiment and corporate bond returns

Abstract

Keywords

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