Please use this identifier to cite or link to this item:
Title: Public mood – driven asset allocation : the importance of financial sentiment in portfolio management
Authors: Malandri, Lorenzo
Xing, Frank Z.
Orsenigo, Carlotta
Vercellis, Carlo
Cambria, Erik
Keywords: Engineering::Computer science and engineering
Issue Date: 2018
Source: Malandri, L., Xing, F. Z., Orsenigo, C., Vercellis, C., & Cambria, E. (2018). Public mood – driven asset allocation : the importance of financial sentiment in portfolio management. Cognitive Computation, 10(6), 1167-1176. doi:10.1007/s12559-018-9609-2
Journal: Cognitive Computation
Abstract: The study of the impact of investor sentiment on stock returns has gained increasing momentum in the past few years. It has been widely accepted that public mood is correlated with financial markets. However, only a few studies discussed how the public mood would affect one of the fundamental problems of computational finance: portfolio management. In this study, we use public financial sentiment and historical prices collected from the New York Stock Exchange (NYSE) to train multiple machine learning models for automatic wealth allocation across a set of assets. Unlike previous studies which set as target variable the asset prices in the portfolio, the variable to predict here is represented by the best asset allocation strategy ex post. Experiments performed on five portfolios show that long short-term memory networks are superior to multi-layer perceptron and random forests producing, in the period under analysis, an average increase in the revenue across the portfolios ranging between 5% (without financial mood) and 19% (with financial mood) compared to the equal-weighted portfolio. Results show that our all-in-one and end-to-end approach for automatic portfolio selection outperforms the equal-weighted portfolio. Moreover, when using long short-term memory networks, the employment of sentiment data in addition to lagged data leads to greater returns for all the five portfolios under evaluation. Finally, we find that among the employed machine learning algorithms, long short-term memory networks are better suited for learning the impact of public mood on financial time series.
ISSN: 1866-9956
DOI: 10.1007/s12559-018-9609-2
Rights: © 2018 Springer Science+Business Media, LLC, part of Springer Nature. All rights reserved.
Fulltext Permission: none
Fulltext Availability: No Fulltext
Appears in Collections:SCSE Journal Articles

Citations 10

Updated on Mar 18, 2023

Web of ScienceTM
Citations 10

Updated on Mar 18, 2023

Page view(s)

Updated on Mar 21, 2023

Google ScholarTM




Items in DR-NTU are protected by copyright, with all rights reserved, unless otherwise indicated.