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https://doi.org/10.21256/zhaw-24408| Publication type: | Master thesis |
| Title: | Using financial news for stock price direction prediction : an empirical investigation |
| Authors: | Harder, Pedro |
| Advisors / Reviewers: | Fazlija, Bledar |
| DOI: | 10.21256/zhaw-24408 |
| Extent: | 54 |
| Issue Date: | 2021 |
| Publisher / Ed. Institution: | ZHAW Zürcher Hochschule für Angewandte Wissenschaften |
| Publisher / Ed. Institution: | Winterthur |
| Language: | English |
| Subject (DDC): | 006: Special computer methods 332: Financial economics |
| Abstract: | The semi-strong form of financial market efficiency states that asset prices reflect all publicly available information. Consequently, natural language processing methods can be used to extract the market sentiment from the information such as the news. However, traditional natural language processing methods have the disadvantage that some information such as the context of words or the structure of sentences get lost. The purpose of this master thesis is to extract the sentiment of the financial markets from news articles and to use the estimated sentiment scores to predict the price direction of the stock market index Standard & Poor's 500. To overcome the drawbacks of traditional natural language methods, state-of-the-art natural language processing models based on the Transformer architecture are used in this master thesis. To enable the best possible classification performance of sentiment scores, state-of-the-art bidirectional encoder representations from transformers (BERT) models are used. The pretrained transformer networks are fine-tuned on a labeled financial dataset to be able to estimate the sentiment of the financial markets. After fine-tuning the models, they are applied to news articles from Bloomberg and Reuters to predict the sentiment score of the news. To forecast the price direction of the stock market index, the predicted sentiment scores are fed into a machine learning model. Thereby, the sentiment scores of the titles, the content, and their sentiment scores combined with past time series information of the stock market index are used as input. The results indicate that the use of sentiment scores generated from news content can be used for stock price direction prediction. The use of sentiment scores extracted from the titles or the combination of sentiment scores from the titles and the content does not improve the quality of the prediction. Based on the findings of this master thesis, it can be concluded that the sentiment scores can be used for the prediction of the stock price direction. For further research in this area, the author of this master thesis recommends using recurrent deep learning models. Due to their internal state, these deep learning models have a memory that can be useful for predicting stock price directions. Practical recommendations are that the sentiment scores can be used in a risk-based approach as a complement to the calculation of the value at risk or the expected shortfall. |
| URI: | https://digitalcollection.zhaw.ch/handle/11475/24408 |
| License (according to publishing contract): | CC BY-NC-ND 4.0: Attribution - Non commercial - No derivatives 4.0 International |
| Departement: | School of Management and Law |
| Appears in collections: | MSc Banking and Finance |
Files in This Item:
| File | Description | Size | Format | |
|---|---|---|---|---|
| Master_Thesis_Harder.pdf | 1.61 MB | Adobe PDF |  View/Open |
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Harder, P. (2021). Using financial news for stock price direction prediction : an empirical investigation [Master’s thesis, ZHAW Zürcher Hochschule für Angewandte Wissenschaften]. https://doi.org/10.21256/zhaw-24408
Harder, P. (2021) Using financial news for stock price direction prediction : an empirical investigation. Master’s thesis. ZHAW Zürcher Hochschule für Angewandte Wissenschaften. Available at: https://doi.org/10.21256/zhaw-24408.
P. Harder, “Using financial news for stock price direction prediction : an empirical investigation,” Master’s thesis, ZHAW Zürcher Hochschule für Angewandte Wissenschaften, Winterthur, 2021. doi: 10.21256/zhaw-24408.
HARDER, Pedro, 2021. Using financial news for stock price direction prediction : an empirical investigation. Master’s thesis. Winterthur: ZHAW Zürcher Hochschule für Angewandte Wissenschaften
Harder, Pedro. 2021. “Using Financial News for Stock Price Direction Prediction : An Empirical Investigation.” Master’s thesis, Winterthur: ZHAW Zürcher Hochschule für Angewandte Wissenschaften. https://doi.org/10.21256/zhaw-24408.
Harder, Pedro. Using Financial News for Stock Price Direction Prediction : An Empirical Investigation. ZHAW Zürcher Hochschule für Angewandte Wissenschaften, 2021, https://doi.org/10.21256/zhaw-24408.
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