Bond markets respond differently to macroeconomic news compared to equity markets, yet most sentiment models are trained primarily on general financial or equity news data. However, bond prices often move in the opposite direction to economic optimism, making general or equity-based sentiment tools potentially misleading. We introduce BondBERT, a transformer-based language model fine-tuned on bond-specific news. BondBERT can act as the perception and reasoning component of a financial decision-support agent, providing sentiment signals that integrate with forecasting models. We propose a generalisable framework for adapting transformers to low-volatility, domain-inverse sentiment tasks by compiling and cleaning 30,000 UK bond market articles (2018-2025). BondBERT's sentiment predictions are compared against FinBERT, FinGPT, and Instruct-FinGPT using event-based correlation, up/down accuracy analyses, and LSTM forecasting across ten UK sovereign bonds. We find that BondBERT consistently produces positive correlations with bond returns, and achieves higher alignment and forecasting accuracy than the three baseline models. These results demonstrate that domain-specific sentiment adaptation better captures fixed income dynamics, bridging a gap between NLP advances and bond market analytics.

Recent advances in finance-specific language models such as FinBERT have enabled the quantification of public sentiment into index-based measures, yet compressing diverse linguistic signals into single metrics overlooks contextual nuances and limits interpretability. To address this limitation, explainable AI techniques, particularly SHAP (SHapley Additive Explanations), have been employed to identify influential features. However, SHAP's computational cost grows exponentially with input features, making it impractical for large-scale text-based financial data. This study introduces a GRU-based forecasting framework enhanced with GroupSHAP, which quantifies contributions of semantically related keyword groups rather than individual tokens, substantially reducing computational burden while preserving interpretability. We employed FinBERT to embed news articles from 2015 to 2024, clustered them into coherent semantic groups, and applied GroupSHAP to measure each group's contribution to stock price movements. The resulting group-level SHAP variables across multiple topics were used as input features for the prediction model. Empirical results from one-day-ahead forecasting of the S&P 500 index throughout 2024 demonstrate that our approach achieves a 32.2% reduction in MAE and a 40.5% reduction in RMSE compared with benchmark models without the GroupSHAP mechanism. This research presents the first application of GroupSHAP in news-driven financial forecasting, showing that grouped sentiment representations simultaneously enhance interpretability and predictive performance.

Large language models (LLMs) continue to advance, with an increasing number of domain-specific variants tailored for specialised tasks. However, these models often lack transparency and explainability, can be costly to fine-tune, require substantial prompt engineering, yield inconsistent results across domains, and impose significant adverse environmental impact due to their high computational demands. To address these challenges, we propose the Bayesian network LLM fusion (BNLF) framework, which integrates predictions from three LLMs, including FinBERT, RoBERTa, and BERTweet, through a probabilistic mechanism for sentiment analysis. BNLF performs late fusion by modelling the sentiment predictions from multiple LLMs as probabilistic nodes within a Bayesian network. Evaluated across three human-annotated financial corpora with distinct linguistic and contextual characteristics, BNLF demonstrates consistent gains of about six percent in accuracy over the baseline LLMs, underscoring its robustness to dataset variability and the effectiveness of probabilistic fusion for interpretable sentiment classification.

We examine how textual features in earnings press releases predict stock returns on earnings announcement days. Using over 138,000 press releases from 2005 to 2023, we compare traditional bag-of-words and BERT-based embeddings. We find that press release content (soft information) is as informative as earnings surprise (hard information), with FinBERT yielding the highest predictive power. Combining models enhances explanatory strength and interpretability of the content of press releases. Stock prices fully reflect the content of press releases at market open. If press releases are leaked, it offers predictive advantage. Topic analysis reveals self-serving bias in managerial narratives. Our framework supports real-time return prediction through the integration of online learning, provides interpretability and reveals the nuanced role of language in price formation.

Sentiment analysis, widely used in product reviews, also impacts financial markets by influencing asset prices through microblogs and news articles. Despite research in sentiment-driven finance, many studies focus on sentence-level classification, overlooking its practical application in trading. This study bridges that gap by evaluating sentiment-based trading strategies for generating positive alpha. We conduct a backtesting analysis using sentiment predictions from three models (two classification and one regression) applied to news articles on Dow Jones 30 stocks, comparing them to the benchmark Buy&Hold strategy. Results show all models produced positive returns, with the regression model achieving the highest return of 50.63% over 28 months, outperforming the benchmark Buy&Hold strategy. This highlights the potential of sentiment in enhancing investment strategies and financial decision-making.

Forecasting central bank policy decisions remains a persistent challenge for investors, financial institutions, and policymakers due to the wide-reaching impact of monetary actions. In particular, anticipating shifts in the U.S. federal funds rate is vital for risk management and trading strategies. Traditional methods relying only on structured macroeconomic indicators often fall short in capturing the forward-looking cues embedded in central bank communications. This study examines whether predictive accuracy can be enhanced by integrating structured data with unstructured textual signals from Federal Reserve communications. We adopt a multi-modal framework, comparing traditional machine learning models, transformer-based language models, and deep learning architectures in both unimodal and hybrid settings. Our results show that hybrid models consistently outperform unimodal baselines. The best performance is achieved by combining TF-IDF features of FOMC texts with economic indicators in an XGBoost classifier, reaching a test AUC of 0.83. FinBERT-based sentiment features marginally improve ranking but perform worse in classification, especially under class imbalance. SHAP analysis reveals that sparse, interpretable features align more closely with policy-relevant signals. These findings underscore the importance of integrating textual and structured signals transparently. For monetary policy forecasting, simpler hybrid models can offer both accuracy and interpretability, delivering actionable insights for researchers and decision-makers.

This study introduces an interpretable machine learning (ML) framework to extract macroeconomic alpha from global news sentiment. We process the Global Database of Events, Language, and Tone (GDELT) Project's worldwide news feed using FinBERT -- a Bidirectional Encoder Representations from Transformers (BERT) based model pretrained on finance-specific language -- to construct daily sentiment indices incorporating mean tone, dispersion, and event impact. These indices drive an XGBoost classifier, benchmarked against logistic regression, to predict next-day returns for EUR/USD, USD/JPY, and 10-year U.S. Treasury futures (ZN). Rigorous out-of-sample (OOS) backtesting (5-fold expanding-window cross-validation, OOS period: c. 2017-April 2025) demonstrates exceptional, cost-adjusted performance for the XGBoost strategy: Sharpe ratios achieve 5.87 (EUR/USD), 4.65 (USD/JPY), and 4.65 (Treasuries), with respective compound annual growth rates (CAGRs) exceeding 50% in Foreign Exchange (FX) and 22% in bonds. Shapley Additive Explanations (SHAP) affirm that sentiment dispersion and article impact are key predictive features. Our findings establish that integrating domain-specific Natural Language Processing (NLP) with interpretable ML offers a potent and explainable source of macro alpha.

Brand reputation in the banking sector is maintained through insightful analysis of customer opinion on code-mixed and multilingual content. Conventional NLP models misclassify or ignore code-mixed text, when mix with low resource languages such as Sinhala-English and fail to capture domain-specific knowledge. This study introduces a hybrid NLP method to improve keyword extraction, content filtering, and aspect-based classification of banking content. Keyword extraction in English is performed with a hybrid approach comprising a fine-tuned SpaCy NER model, FinBERT-based KeyBERT embeddings, YAKE, and EmbedRank, which results in a combined accuracy of 91.2%. Code-mixed and Sinhala keywords are extracted using a fine-tuned XLM-RoBERTa model integrated with a domain-specific Sinhala financial vocabulary, and it results in an accuracy of 87.4%. To ensure data quality, irrelevant comment filtering was performed using several models, with the BERT-base-uncased model achieving 85.2% for English and XLM-RoBERTa 88.1% for Sinhala, which was better than GPT-4o, SVM, and keyword-based filtering. Aspect classification followed the same pattern, with the BERT-base-uncased model achieving 87.4% for English and XLM-RoBERTa 85.9% for Sinhala, both exceeding GPT-4 and keyword-based approaches. These findings confirm that fine-tuned transformer models outperform traditional methods in multilingual financial text analysis. The present framework offers an accurate and scalable solution for brand reputation monitoring in code-mixed and low-resource banking environments.

We investigate the efficacy of large language models (LLMs) in sentiment analysis of U.S. financial news and their potential in predicting stock market returns. We analyze a dataset comprising 965,375 news articles that span from January 1, 2010, to June 30, 2023; we focus on the performance of various LLMs, including BERT, OPT, FINBERT, and the traditional Loughran-McDonald dictionary model, which has been a dominant methodology in the finance literature. The study documents a significant association between LLM scores and subsequent daily stock returns. Specifically, OPT, which is a GPT-3 based LLM, shows the highest accuracy in sentiment prediction with an accuracy of 74.4%, slightly ahead of BERT (72.5%) and FINBERT (72.2%). In contrast, the Loughran-McDonald dictionary model demonstrates considerably lower effectiveness with only 50.1% accuracy. Regression analyses highlight a robust positive impact of OPT model scores on next-day stock returns, with coefficients of 0.274 and 0.254 in different model specifications. BERT and FINBERT also exhibit predictive relevance, though to a lesser extent. Notably, we do not observe a significant relationship between the Loughran-McDonald dictionary model scores and stock returns, challenging the efficacy of this traditional method in the current financial context. In portfolio performance, the long-short OPT strategy excels with a Sharpe ratio of 3.05, compared to 2.11 for BERT and 2.07 for FINBERT long-short strategies. Strategies based on the Loughran-McDonald dictionary yield the lowest Sharpe ratio of 1.23. Our findings emphasize the superior performance of advanced LLMs, especially OPT, in financial market prediction and portfolio management, marking a significant shift in the landscape of financial analysis tools with implications to financial regulation and policy analysis.

This study explores the comparative performance of cutting-edge AI models, i.e., Finaance Bidirectional Encoder representations from Transsformers (FinBERT), Generatice Pre-trained Transformer GPT-4, and Logistic Regression, for sentiment analysis and stock index prediction using financial news and the NGX All-Share Index data label. By leveraging advanced natural language processing models like GPT-4 and FinBERT, alongside a traditional machine learning model, Logistic Regression, we aim to classify market sentiment, generate sentiment scores, and predict market price movements. This research highlights global AI advancements in stock markets, showcasing how state-of-the-art language models can contribute to understanding complex financial data. The models were assessed using metrics such as accuracy, precision, recall, F1 score, and ROC AUC. Results indicate that Logistic Regression outperformed the more computationally intensive FinBERT and predefined approach of versatile GPT-4, with an accuracy of 81.83% and a ROC AUC of 89.76%. The GPT-4 predefined approach exhibited a lower accuracy of 54.19% but demonstrated strong potential in handling complex data. FinBERT, while offering more sophisticated analysis, was resource-demanding and yielded a moderate performance. Hyperparameter optimization using Optuna and cross-validation techniques ensured the robustness of the models. This study highlights the strengths and limitations of the practical applications of AI approaches in stock market prediction and presents Logistic Regression as the most efficient model for this task, with FinBERT and GPT-4 representing emerging tools with potential for future exploration and innovation in AI-driven financial analytics