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G-2024-32

Optimal text-based time-series indices

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We propose an approach to construct text-based time-series indices in an optimal way -typically, indices that maximize the contemporaneous relation or the predictive performance with respect to a target variable, such as inflation. We illustrate our methodology with a corpus of news articles from the Wall Street Journal by optimizing text-based indices focusing on tracking the VIX index and inflation expectations. Our results highlight the superior performance of our approach compared to existing indices.

, 18 pages

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G2432.pdf (500 KB)