Paul Glasserman - Does Unusual News Forecast Market Stress?

Seminar | January 28 | 3:30-4:30 p.m. | 1174 Etcheverry Hall

 Paul Glasserman, Columbia University

 Industrial Engineering & Operations Research

Abstract: Applying sentiment analysis to news articles on large financial companies, we find that an increase in “unusual” negative news predicts an increase in stock market volatility and thus potential market stress. Similarly, unusual positive news forecasts lower volatility. Our analysis is based on more than 360,000 articles on 50 large financial companies, published in 1996–2014. Unusualness interacted with sentiment forecasts volatility – at both the company-specific and aggregate level – several months into the future. Furthermore, unusual news is reflected in volatility more slowly at the aggregate than at the company-specific level. The observed behavior of volatility in our analysis may be explained by attention constraints on investors. This is joint work with Harry Mamaysky.

Bio: Professor Glasserman's research and teaching address risk management, derivative securities, Monte Carlo simulation, statistics and operations. Prior to joining Columbia, Glasserman was with Bell Laboratories; he has also held visiting positions at Princeton University, NYU, and the Federal Reserve Bank of New York. In 2011-2012, he was on leave from Columbia and working at the Office of Financial Research in the U.S. Treasury Department, where he continues to serve as a part-time consultant.

Glasserman's publications include the book Monte Carlo Methods in Financial Engineering (Springer, 2004), which received the 2006 Lanchester Prize and the 2005 I-Sim Outstanding Publication Award. Glasserman is a past recipient of the National Young Investigator Award from the National Science Foundation (1994 - 99), IBM University Partnership Awards (1998 - 2001), the TIMS Outstanding Simulation Publication Award (1992), the Erlang Prize (1996), the IMS Medallion from the Institute of Mathematical Statistics (2006), and a fellowship from the FDIC Center for Financial Research (2004). He received the 2004 Wilmott Award for Cutting-Edge Research in Quantitative Finance and Risk Magazine's 2007 Quant of the Year Award, and he received a U.S. patent for an option pricing method. He was named an INFORMS Fellow in 2008. He is also a two-time recipient of the Dean's Award for Teaching Excellence (1994, 2000). Glasserman serves on the editorial boards of Finance & Stochastics, Mathematical Finance, the Journal of Derivatives, and Stochastic Systems.

 kmcaleer@berkeley.edu, 510-642-6222