News Sentiment and Commodity Futures Investing

ABSTRACT We investigate the role of media news sentiment in commodity futures investing. The weekly rebalanced long‐short portfolio sorted by news sentiment generates a significant average annualized return of around 8.3% after transaction costs. The time‐series spanning test reveals that the abnormal return of the long‐short portfolio sorted by news sentiment is statistically significant at above 7% even after controlling for various benchmark factors. The premium of the news sentiment factor is also significantly priced at above 8% in the cross‐section of commodity futures returns. Furthermore, we show that news sentiment enhances the performance of commodity futures investment portfolios.