Explaining US Consumer Behavior with News Sentiment

ACM Transaction on Management Information Systems, Vol. 2, No. 2, Art. 9. (2011)

Posted: 10 Nov 2010 Last revised: 24 Aug 2012

See all articles by Matthias Uhl

Matthias Uhl

University of Zurich - Department Finance

Date Written: July 1, 2011

Abstract

We examine the information content of a newly created news sentiment index from over 300,000 articles from some of the most widely read newspapers in the US to explain changes in the University of Michigan Index of Consumer Sentiment from 1995 to 2009. Using ARMA-models, we show that consumer sentiment is influenced by news sentiment and other variables, such as prices, income and interest rates. While there exists a statistically significant relationship between news sentiment and private consumption, the consumption behavior of private households can best be explained by consumer sentiment combined with changes in personal income and consumer prices. We add news sentiment to the causality chain before consumer sentiment and private consumption.

Keywords: news sentiment, consumer sentiment, private consumption

JEL Classification: D12, E21, E27

Suggested Citation

Uhl, Matthias, Explaining US Consumer Behavior with News Sentiment (July 1, 2011). ACM Transaction on Management Information Systems, Vol. 2, No. 2, Art. 9. (2011), Available at SSRN: https://ssrn.com/abstract=1706004 or http://dx.doi.org/10.2139/ssrn.1706004

Matthias Uhl (Contact Author)

University of Zurich - Department Finance ( email )

Schönberggasse 1
Zürich, 8001
Switzerland

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