Effects of Daily News Sentiment on Stock Price Forecasting

TL;DR

This paper investigates how daily news sentiment influences stock price forecasting by creating a large news database, extracting sentiment scores, and comparing LSTM models with and without sentiment features.

Contribution

It introduces a comprehensive framework for collecting and preprocessing financial news data and demonstrates the impact of sentiment features on stock price prediction accuracy.

Findings

Sentiment features improve LSTM forecast accuracy.

Created a database of 0.5 million news articles over 3.7 years.

Compared multiple sentiment libraries for feature extraction.

Abstract

Predicting future prices of a stock is an arduous task to perform. However, incorporating additional elements can significantly improve our predictions, rather than relying solely on a stock's historical price data to forecast its future price. Studies have demonstrated that investor sentiment, which is impacted by daily news about the company, can have a significant impact on stock price swings. There are numerous sources from which we can get this information, but they are cluttered with a lot of noise, making it difficult to accurately extract the sentiments from them. Hence the focus of our research is to design an efficient system to capture the sentiments from the news about the NITY50 stocks and investigate how much the financial news sentiment of these stocks are affecting their prices over a period of time. This paper presents a robust data collection and preprocessing framework to create a news database for a timeline of around 3.7 years, consisting of almost half a million news articles. We also capture the stock price information for this timeline and create multiple time series data, that include the sentiment scores from various sections of the article, calculated using different sentiment libraries. Based on this, we fit several LSTM models to forecast the stock prices, with and without using the sentiment scores as features and compare their performances.