May 2011
Beginner to intermediate
384 pages
12h 28m
English
Content preview from The Handbook of News Analytics in FinanceBecome an O’Reilly member and get unlimited access to this title plus top books and audiobooks from O’Reilly and nearly 200 top publishers, thousands of courses curated by job role, 150+ live events each month,
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17.4 THE IMPLEMENTATION OF SEMANTIC NEWS ANALYSIS
In order to use news as a source for certain market risk evaluation, it needs to be determined what the impact of a news item is on the equities of portfolios in that specific market. Recent technological developments, like SemLab's ViewerPro semantic analysis platform, have enabled the creation of data-mining tools that can interpret live news-feeds. Combining such technologies with risk metrics, such as VaR, could lead to quicker, more flexible, and more accurate risk assessment calculation.
Historical data can be analysed to determine the magnitude of specific events or event combinations. This would yield an estimate of the probability that abnormal market conditions occur. It would also result in an estimate of the effect of unstable market behaviour on a certain equity. As such, news event analysis could be used as input for risk measures to calculate risk metrics during abnormal market conditions and answer two important questions: “Will there be abnormal market conditions?” and “What will be the effect on a certain portfolio?”
The efficient market hypothesis states that prices of traded assets (stocks, bonds, etc.) reflect all known information. Typically, risk measure calculations only take into account risks that are based on the recent historical data of single assets or portfolios. This works relatively well under stable market conditions in which recent historical behaviour is an acceptable predictor of the expected ...
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