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Optimal Text-Based Time-Series Indices
Published 16 May 2024 in econ.EM, cs.AI, and q-fin.CP | (2405.10449v1)
Abstract: We propose an approach to construct text-based time-series indices in an optimal way--typically, indices that maximize the contemporaneous relation or the predictive performance with respect to a target variable, such as inflation. We illustrate our methodology with a corpus of news articles from the Wall Street Journal by optimizing text-based indices focusing on tracking the VIX index and inflation expectations. Our results highlight the superior performance of our approach compared to existing indices.
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