TY - JOUR
T1 - Media Sentiment and Currency Reversals
AU - Filippou, Ilias
AU - Taylor, Mark P.
AU - Wang, Zigan
N1 - Publisher Copyright:
© The Author(s), 2023. Published by Cambridge University Press on behalf of the Michael G. Foster School of Business, University of Washington.
PY - 2024/5/15
Y1 - 2024/5/15
N2 - Analyzing 48 foreign exchange (FX) rates and 1.2 million FX-related news articles over a 35-year period, using digital textual analysis, we find that a currency reversal investment strategy that buys (sells) currencies with low (high) media sentiment offers strong positive and statistically significant returns and Sharpe ratios. The results are robust and the strategy adds value over other currency premia determinants. Analysts' forecasts systematically mispredict the reversal strategy. This is the first article to show that price reversals based on media sentiment are a well-defined feature of the FX market.
AB - Analyzing 48 foreign exchange (FX) rates and 1.2 million FX-related news articles over a 35-year period, using digital textual analysis, we find that a currency reversal investment strategy that buys (sells) currencies with low (high) media sentiment offers strong positive and statistically significant returns and Sharpe ratios. The results are robust and the strategy adds value over other currency premia determinants. Analysts' forecasts systematically mispredict the reversal strategy. This is the first article to show that price reversals based on media sentiment are a well-defined feature of the FX market.
UR - https://www.scopus.com/pages/publications/85163711090
U2 - 10.1017/S0022109023000534
DO - 10.1017/S0022109023000534
M3 - Article
AN - SCOPUS:85163711090
SN - 0022-1090
VL - 59
SP - 1401
EP - 1429
JO - Journal of Financial and Quantitative Analysis
JF - Journal of Financial and Quantitative Analysis
IS - 3
ER -