Journal of Banking & Finance Vol. 178 2025
Newswire tone-overlay commodity portfolios
Abstract
This paper introduces the tone-overlay framework for adjusting traditional commodity signals based on the level of salient optimism or pessimism in commodity newswires. By implementing the novel tone-overlay allocation strategy on 26 commodities using traditional allocation signals, we demonstrate that the resulting long-short portfolios yield substantial performance gains compared to the corresponding plain-vanilla traditional portfolios. Our findings suggest that newswire tone provides short-term predictive power for commodity futures returns, beyond well-known commodity characteristics. The tone-overlay portfolios harness a temporary mispricing that reflects an overreaction of commodity futures prices to commodity-specific newswire tone. The outperformance of the tone overlay strengthens with the salience of the newswire tone, consistent with theories of limited investor attention.
- DOI
- 10.1016/j.jbankfin.2025.107501
- Volume
- 178
- Pages
- 107501
- Language
- en
- Sources
- openalex crossref bibtex:phds-export.bib