We propose a protocol for identifying genuine risk factors. A genuine risk factor must be related to the covariance matrix of returns, must be priced in the cross-section of returns, and should yield a reward-to-risk ratio that is reasonable enough to be consistent with risk pricing. A market...

We employ a semi-supervised topic model to extract the rare disaster risks and economic narratives from 7,000,000 NYT articles over 160 years. Our approach addresses the look-ahead bias and changes in semantics. War positively predicts market return in- and out-of-sample, while the economic...

Using a semi-supervised topic model on 7,000,000 New York Times articles spanning 160 years, we test whether topics of media discourse predict future stock and bond market returns to test rational and behavioral hypotheses about market valuation of disaster risk. Focusing on media discourse...

We analyze the daily predictability of investor sentiment across four major asset classes and compare sentiment measures based on news and social media with those based on trade information. For the majority of assets, trade-based sentiment measures outperform their text-based equivalents for...