Financial Sentiment Index with Natural Language Processing

Atak A.

42nd EBES CONFERENCE - LISBON , Lisbon, Portugal, 12 - 14 January 2023, pp.1-19, (Summary Text)

  • Publication Type: Conference Paper / Summary Text
  • City: Lisbon
  • Country: Portugal
  • Page Numbers: pp.1-19
  • Middle East Technical University Affiliated: Yes

Abstract

In this paper, we aim to create a financial sentiment index by investigating the company’s voluntary information disclosures using 10-K reports. We extract relevant financial information for sentiment analysis through Natural Language Processing (NLP). We measure strategy-related disclosures, and their cross-sectional variation and classify report content into generic sections using synonym lists divided into four main categories according to their liquidity risk profile, risk positions, intra-annual information, and their exposure to risk. We create an adequate analytical tool and a financial dictionary to depict the importance of granular financial disclosure for investors to identify correctly the risk-taking behaviour and hence make the aggregated effects traceable.