SSAAM: Sentiment Signal-based Asset Allocation Method with Causality Information

Abstract

This study demonstrates whether financial text is useful for tactical asset allocation using stocks by using natural language processing to create polarity indexes in financial news. In this study, we performed clustering of the created polarity indexes using the change-point detection algorithm. In addition, we constructed a stock portfolio and rebalanced it at each change point utilizing an optimization algorithm. Consequently, the asset allocation method proposed in this study outperforms the comparative approach. This result suggests that the polarity index helps construct the equity asset allocation method.