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This paper introduces a new risk-on risk-off strategy for the stock market, which combines a financial stress indicator with a sentiment analysis done by ChatGPT reading and interpreting Bloomberg daily market summaries. Forecasts of market stress derived from volatility and credit spreads are enhanced when combined with the financial news sentiment derived from GPT4. As a result, the strategy shows improved performance, evidenced by higher Sharpe ratio and reduced maximum drawdowns. The improved performance is consistent across the NASDAQ, the S&P 500 and the six major equity markets, indicating that the method generalises across equities markets.

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Stress Index Strategy Enhanced with Financial News Sentiment Analysis for the Equity Markets

  • 会议论文

  • 发表日期：

    2026年

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  • Baptiste Lefort,
  • Eric Benhamou,
  • Jean-Jacques Ohana,
  • David Saltiel,
  • Beatrice Guez

摘要

This paper introduces a new risk-on risk-off strategy for the stock market, which combines a financial stress indicator with a sentiment analysis done by ChatGPT reading and interpreting Bloomberg daily market summaries. Forecasts of market stress derived from volatility and credit spreads are enhanced when combined with the financial news sentiment derived from GPT4. As a result, the strategy shows improved performance, evidenced by higher Sharpe ratio and reduced maximum drawdowns. The improved performance is consistent across the NASDAQ, the S&P 500 and the six major equity markets, indicating that the method generalises across equities markets.