Large language models (LLMs) have demonstrated promising performance in various financial applications, though their potential in complex investment strategies remains underexplored. To address this gap, we investigate how LLMs can predict price movements in stock and bond portfolios using economic indicators, enabling portfolio adjustments akin to those employed by institutional investors. Additionally, we explore the impact of incorporating different personas within LLMs, using an ensemble approach to leverage their diverse predictions. Our findings show that LLM-based strategies, especially when combined with the mode ensemble, outperform the buy-and-hold strategy in terms of Sharpe ratio during periods of rising consumer price index (CPI). However, traditional strategies are more effective during declining CPI trends or sharp market downturns. These results suggest that while LLMs can enhance portfolio management, they may require complementary strategies to optimize performance across varying market conditions.

Block modeling is widely used in studies on complex networks. The cornerstone model is the stochastic block model (SBM), widely used over the past decades. However, the SBM is limited in analyzing complex networks as the model is, in essence, a random graph model that cannot reproduce the basic properties of many complex networks, such as sparsity and heavy-tailed degree distribution. In this paper, we provide an edge exchangeable block model that incorporates such basic features and simultaneously infers the latent block structure of a given complex network. Our model is a Bayesian nonparametric model that flexibly estimates the number of blocks and takes into account the possibility of unseen nodes. Using one synthetic dataset and one real-world stock ownership dataset, we show that our model outperforms state-of-the-art SBMs for held-out link prediction tasks.

The media plays a central role in monitoring powerful institutions and identifying any activities harmful to the public interest. In the investing sphere constituted of 46,583 officially listed domestic firms on the stock exchanges worldwide, there is a growing interest `to do the right thing', i.e., to put pressure on companies to improve their environmental, social and government (ESG) practices. However, how to overcome the sparsity of ESG data from non-reporting firms, and how to identify the relevant information in the annual reports of this large universe? Here, we construct a vast heterogeneous information network that covers the necessary information surrounding each firm, which is assembled using seven professionally curated datasets and two open datasets, resulting in about 50 million nodes and 400 million edges in total. Exploiting this heterogeneous information network, we propose a model that can learn from past adverse media coverage patterns and predict the occurrence of future adverse media coverage events on the whole universe of firms. Our approach is tested using the adverse media coverage data of more than 35,000 firms worldwide from January 2012 to May 2018. Comparing with state-of-the-art methods with and without the network, we show that the predictive accuracy is substantially improved when using the heterogeneous information network. This work suggests new ways to consolidate the diffuse information contained in big data in order to monitor dominant institutions on a global scale for more socially responsible investment, better risk management, and the surveillance of powerful institutions.

Topic models are one of the most frequently used models in machine learning due to its high interpretability and modular structure. However extending the model to include supervisory signal, incorporate pre-trained word embedding vectors and add nonlinear output function to the model is not an easy task because one has to resort to highly intricate approximate inference procedure. In this paper, we show that topic models could be viewed as performing a neighborhood aggregation algorithm where the messages are passed through a network defined over words. Under the network view of topic models, nodes corresponds to words in a document and edges correspond to either a relationship describing co-occurring words in a document or a relationship describing same word in the corpus. The network view allows us to extend the model to include supervisory signals, incorporate pre-trained word embedding vectors and add nonlinear output function to the model in a simple manner. Moreover, we describe a simple way to train the model that is well suited in a semi-supervised setting where we only have supervisory signals for some portion of the corpus and the goal is to improve prediction performance in the held-out data. Through careful experiments we show that our approach outperforms state-of-the-art supervised Latent Dirichlet Allocation implementation in both held-out document classification tasks and topic coherence.

We propose a simple discrete time semi-supervised graph embedding approach to link prediction in dynamic networks. The learned embedding reflects information from both the temporal and cross-sectional network structures, which is performed by defining the loss function as a weighted sum of the supervised loss from past dynamics and the unsupervised loss of predicting the neighborhood context in the current network. Our model is also capable of learning different embeddings for both formation and dissolution dynamics. These key aspects contributes to the predictive performance of our model and we provide experiments with three real--world dynamic networks showing that our method is comparable to state of the art methods in link formation prediction and outperforms state of the art baseline methods in link dissolution prediction.

We present a new approach to estimating the interdependence of industries in an economy by applying data science solutions. By exploiting interfirm buyer--seller network data, we show that the problem of estimating the interdependence of industries is similar to the problem of uncovering the latent block structure in network science literature. To estimate the underlying structure with greater accuracy, we propose an extension of the sparse block model that incorporates node textual information and an unbounded number of industries and interactions among them. The latter task is accomplished by extending the well-known Chinese restaurant process to two dimensions. Inference is based on collapsed Gibbs sampling, and the model is evaluated on both synthetic and real-world datasets. We show that the proposed model improves in predictive accuracy and successfully provides a satisfactory solution to the motivated problem. We also discuss issues that affect the future performance of this approach.

Understanding the mutual relationships between information flows and social activity in society today is one of the cornerstones of the social sciences. In financial economics, the key issue in this regard is understanding and quantifying how news of all possible types (geopolitical, environmental, social, financial, economic, etc.) affect trading and the pricing of firms in organized stock markets. In this article, we seek to address this issue by performing an analysis of more than 24 million news records provided by Thompson Reuters and of their relationship with trading activity for 206 major stocks in the S&P US stock index. We show that the whole landscape of news that affect stock price movements can be automatically summarized via simple regularized regressions between trading activity and news information pieces decomposed, with the help of simple topic modeling techniques, into their "thematic" features. Using these methods, we are able to estimate and quantify the impacts of news on trading. We introduce network-based visualization techniques to represent the whole landscape of news information associated with a basket of stocks. The examination of the words that are representative of the topic distributions confirms that our method is able to extract the significant pieces of information influencing the stock market. Our results show that one of the most puzzling stylized fact in financial economies, namely that at certain times trading volumes appear to be "abnormally large," can be partially explained by the flow of news. In this sense, our results prove that there is no "excess trading," when restricting to times when news are genuinely novel and provide relevant financial information.