Analyzing FOMC Minutes: Accuracy and Constraints of Language Models

This research article analyzes the language used in the official statements released by the Federal Open Market Committee (FOMC) after its scheduled meetings to gain insights into the impact of FOMC official statements on financial markets and economic forecasting. The study reveals that the FOMC is careful to avoid expressing emotion in their sentences and follows a set of templates to cover economic situations. The analysis employs advanced language modeling techniques such as VADER and FinBERT, and a trial test with GPT-4. The results show that FinBERT outperforms other techniques in predicting negative sentiment accurately. However, the study also highlights the challenges and limitations of using current NLP techniques to analyze FOMC texts and suggests the potential for enhancing language models and exploring alternative approaches.

Words that Wound: The Impact of Biased Language on News Sentiment and Stock Market Index

This study investigates the impact of biased language, specifically 'Words that Wound,' on sentiment analysis in a dataset of 45,379 South Korean daily economic news articles. Using Word2Vec, cosine similarity, and an expanded lexicon, we analyzed the influence of these words on news titles' sentiment scores. Our findings reveal that incorporating biased language significantly amplifies sentiment scores' intensity, particularly negativity. The research examines the effect of heightened negativity in news titles on the KOSPI200 index using linear regression and sentiment analysis. Results indicate that the augmented sentiment lexicon (Sent1000), which includes the top 1,000 negative words with high cosine similarity to 'Crisis,' more effectively captures the impact of news sentiment on the stock market index than the original KNU sentiment lexicon (Sent0). The ARDL model and Impulse Response Function (IRF) analyses disclose that Sent1000 has a stronger and more persistent impact on KOSPI200 compared to Sent0. These findings emphasize the importance of understanding language's role in shaping market dynamics and investor sentiment, particularly the impact of negatively biased language on stock market indices. The study highlights the need for considering context and linguistic nuances when analyzing news content and its potential effects on public opinion and market dynamics.