The purpose of this study is to evaluate the most prevalent techniques of natural language processing (NLP) in terms of their advantages and disadvantages for financial sentiment analysis (FSA), as well as to determine whether machine-learning-based approaches to sentiment measurement outperform those that rely on human perception of linguistic features. Additionally, I will outline the differences between these various sentiment analysis techniques by exemplarily showing their application in the financial context to subsequently compare their forecasting performance. To do so, I will use a dataset of messages sent via the online social media website StockTwits as well as a dataset of news headlines. I discover that Machine Learning (ML) improves sentiment classification performance substantially.
| StockTwits Word Cloud |
News Headlines Word Cloud |
 |
 |
| StockTwits Harvard-IV Dictionary |
News Headlines Harvard-IV Dictionary |
 |
 |
| Accuracy: 0.5230523690773067 |
Accuracy: 0.5721745635910225 |
| StockTwits Loughran & McDonald Dictionary |
News Headlines Loughran & McDonald Dictionary |
 |
 |
| Accuracy: 0.5375361596009975 |
Accuracy: 0.5841845386533666 |
| StockTwits Naive Bayes |
News Headlines Naive Bayes |
 |
 |
| Accuracy: 0.7785857246253798 |
Accuracy: 0.7737062296905709 |
| 8 min 42.6 sec |
3 Min 20.8 sec |
| StockTwits Support Vector Machine |
News Headlines Support Vector Machine |
 |
 |
| Accuracy: 0.6277 |
Accuracy: 0.6901 |
| 79 min 28.9 sec |
57 min 23.9 sec |
| StockTwits Logistic Regression |
News Headlines Logistic Regression |
 |
 |
| Accuracy: 0.8244248523230233 |
Accuracy: 0.7961816070591451 |
| 5 min 35.4 sec |
2min 10 sec |
| StockTwits Multilayer Perceptron |
News Headlines Multilayer Perceptron |
 |
 |
| Accuracy: 0.8085178475501894 |
Accuracy: 0.7768529795204634 |
| 8 min 25.4 sec |
3 min 9.7 sec |
| StockTwits Neural Network |
News Headlines Neural Network |
 |
 |
| Accuracy: 0.830794497488041 |
Accuracy: 0.7621 |
| 63 min 48.3 sec |
58 min 24.7 sec |
