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News sentiment in the gold futures market

Lee A. Smales

Journal of Banking & Finance 2014 49, 275-286 open access

This article utilises commodity specific news sentiment data provided by Thomson Reuters News Analytics to examine the relationship between news sentiment and returns in the gold futures market over the period 2003–2012. There is an asymmetric response to news releases with negative news sentiment invoking a greater contemporaneous response in returns of gold futures. There is evidence to support the supposition that net trader positions significantly impact the identified sentiment relationship with the effect greatest when traders are holding positions contrary to their natural position; this may be explained by constraints imposed on traders in terms of credit availability, exchange imposed limits, or inventory required for physical settlement. Recession, and associated changes in credit costs, impact the size of net positions and the news sentiment/return relationship.

The influence of FOMC member characteristics on the monetary policy decision-making process

Lee A. Smales; Nick Apergis

Journal of Banking & Finance 2016 64, 216-231

This paper provides new empirical evidence on a monetary policy committee with heterogeneous members whose decisions affect the efficacy of monetary policy. It thereby provides a link between the literature on monetary policy committees and central bank monetary policy implementation through monetary rules. Using a novel dataset of the idiosyncratic characteristics of FOMC members, over the period from August 1979 to February 2014, the empirical findings show that characteristics such as education, age, and, to a lesser extent, work experience are not important in understanding the FOMC decision-making process. Instead, the results point to the importance of time spent within the Federal Reserve System, tenure on the FOMC itself, and the influence of the Chair in shaping the decision-making process. The results are expected to have implications for the capacity of economic agents, as well as various markets in the economy, to more readily interpret public (monetary policy) information that reaches them. This makes the monetary policy decision process less noisy and thus enhances the capability of agents and markets to attach the correct weight to this information.

Hedging geopolitical risk with precious metals

Dirk G. Baur; Lee A. Smales

Journal of Banking & Finance 2020 117, 105823

We analyse the relationship between geopolitical risk and asset prices and show that geopolitical risk is distinct from existing measures of economic, financial, and political risk and that the response of precious metals to geopolitical risk differs considerably from that of other assets. Precious metals are hedges against geopolitical risk in general and geopolitical threats (as opposed to acts) in particular. Conversely, stocks and bonds respond negatively to geopolitical risk and geopolitical threats. For extreme geopolitical risks, only gold and silver display consistent safe haven properties. Our results show that holding precious metals within a diversified portfolio lowers the impact of geopolitical risk.

In statistics, samples are drawn from a population in a data‐generating process (DGP). Standard errors measure the uncertainty in estimates of population parameters. In science, evidence is generated to test hypotheses in an evidence‐generating process (EGP). We claim that EGP variation across researchers adds uncertainty—nonstandard errors (NSEs). We study NSEs by letting 164 teams test the same hypotheses on the same data. NSEs turn out to be sizable, but smaller for more reproducible or higher rated research. Adding peer‐review stages reduces NSEs. We further find that this type of uncertainty is underestimated by participants.

Search Criteria

News sentiment in the gold futures market

The influence of FOMC member characteristics on the monetary policy decision-making process

Hedging geopolitical risk with precious metals

Nonstandard Errors