Svetlana Borovkova, Vrije Universiteit Amsterdam
In this presentation, we address the issue of trading commodities on the basis of news sentiment. First, we outline the effects of news sentiment on the prices of different commodity futures. Profitable sentiment-based trading strategies are then constructed for individual commodities, with the eventual goal of building a profitable multi-commodity diversified trading strategy. The news sentiment is extracted from the Thomson Reuters News Analytics Engine (TRNAE) and the traded commodities are the constituents of the Dow Jones Commodity Index (DJCI). We show that profitable sentiment-based trading strategies can be constructed, which show consistent good performance for various commodities as well as for commodity portfolios. We analyse the strategies also in terms of risk profiles and show how the downside can be limited.
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