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Sentiment Analysis for View Modeling

  • Frank Xing
  • Erik Cambria
  • Roy Welsch
Chapter
Part of the Socio-Affective Computing book series (SAC, volume 9)

Abstract

This chapter investigates a method to incorporate market sentiment to asset allocation models. In the previous chapter, we experimented with robust mean-variance optimization, which is a static process that finds the status quo optimal portfolio weights and surfs market fluctuations. However, an important piece of the jigsaw is missing, i.e., the irrational components in rise and fall of asset prices. In fact, if all the market participants hold the same robust Markowitz portfolio, the market would not clear, nor would transactions happen. The Black-Litterman model provides us an entry to include subjective views to asset allocation models. As an extension to it, concept-level sentiment analysis methods described in this chapter will be used to compute the subjective views, emulating a financial analyst’s activities.

Keywords

Concept-level sentiment analysis Subjective view modeling Market sentiment The Black-Litterman model Sentic computing ECM-LSTM 

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Copyright information

© Springer Nature Switzerland AG 2019

Authors and Affiliations

  • Frank Xing
    • 1
  • Erik Cambria
    • 1
  • Roy Welsch
    • 2
  1. 1.School of Computer Science and EngineeringNanyang Technological UniversitySingaporeSingapore
  2. 2.Sloan School of ManagementMassachusetts Institute of TechnologyCambridgeUSA

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