Media news sentiment and Commodity futures dynamics

This thesis investigates the impact of media news on the dynamics of commodity futures returns. To achieve this, the study examines the impact of news sentiment in both time-series and cross-sectional settings. This thesis also proposes and tests a new risk factor, media emotion intensity, to explore its value in predicting the cross section of commodity futures returns. Media emotion intensity measures the ratio of emotional content to factual content in media news, reflecting how much the media uses emotional words and phrases to convey factual information. First, the study finds that news sentiment significantly affects the returns of commodity futures. Interestingly, sentiment from non-novel news affects returns more than sentiment from novel news, and the overreaction of returns to news sentiment is mostly triggered by stale content. The impact of news sentiment is also consistent with the prospect theory and can be explained by both information and behavioral finance theories. Second, news sentiment can predict the cross section of commodity futures returns, and this predictability is weakly explained by other benchmark factors suggested in the literature. The risk of news sentiment is significantly priced in the cross-section of portfolio returns. The study also suggests that news sentiment is helpful in enhancing the performance of the long-short strategy in commodity factor investing. Third, this research proposes and investigates a new risk factor, media emotion intensity. This factor is shown to generate a significant annualized average return of 14%, outperforming other key benchmark factors, namely basis, momentum, and basis-momentum, in the market. The risk of media emotion intensity is also priced in the cross section of commodity futures returns, and its risk premium is not subsumed when controlling for various risk sources. In general, this research contributes to understanding the dynamics and risk of commodity futures returns induced by media factors.

Name thesis:degree_name

PhD

Level thesis:degree_level

Doctoral

Discipline thesis:degree_discipline

Finance

Grantor dc:publisher

ResearchSpace@Auckland

Year dc:date.issued

2023

Author dc:creator

• Vu, Thanh Duy

Advisors dc:contributor.advisor

• El-Jahel, Lina
• Chi, Yeguang

Statement dc:rights

• Items in ResearchSpace are protected by copyright, with all rights reserved, unless otherwise indicated.

Licence dc:rights.uri

• https://researchspace.auckland.ac.nz/docs/uoa-docs/rights.htm

Handle dc:identifier.uri

https://hdl.handle.net/2292/66914

OAI identifier oai:identifier

oai:researchspace.auckland.ac.nz:2292/66914