# Can News Predict the Market? Limits of Zero-Shot Financial NLP and the Role of Explainable AI

arXiv: https://arxiv.org/abs/2606.12210 · HTML: https://mlsanity.com/paper/2606.12210/

## Key facts

- No citing papers in the map yet (data through 14 Oct 2026).
- Builds on 36 of its 89 references that are in the map.
- First posted on arXiv 10 Jun 2026.

## Builds on (most cited first, 30 of 36)

- [RoBERTa: A Robustly Optimized BERT Pretraining Approach](https://mlsanity.com/paper/1907.11692/) (2019)
- [A Unified Approach to Interpreting Model Predictions](https://mlsanity.com/paper/1705.07874/) (2017)
- [BART: Denoising Sequence-to-Sequence Pre-training for Natural Language Generation, Translation, and Comprehension](https://mlsanity.com/paper/1910.13461/) (2019)
- ["Why Should I Trust You?": Explaining the Predictions of Any Classifier](https://mlsanity.com/paper/1602.04938/) (2016)
- [Axiomatic Attribution for Deep Networks](https://mlsanity.com/paper/1703.01365/) (2017)
- [A Broad-Coverage Challenge Corpus for Sentence Understanding through Inference](https://mlsanity.com/paper/1704.05426/) (2017)
- [Survey of Hallucination in Natural Language Generation](https://mlsanity.com/paper/2202.03629/) (2022)
- [DeBERTaV3: Improving DeBERTa using ELECTRA-Style Pre-Training with Gradient-Disentangled Embedding Sharing](https://mlsanity.com/paper/2111.09543/) (2021)
- [Explanation in Artificial Intelligence: Insights from the Social Sciences](https://mlsanity.com/paper/1706.07269/) (2017)
- [Fantastically Ordered Prompts and Where to Find Them: Overcoming Few-Shot Prompt Order Sensitivity](https://mlsanity.com/paper/2104.08786/) (2021)
- [Language Models Don't Always Say What They Think: Unfaithful Explanations in Chain-of-Thought Prompting](https://mlsanity.com/paper/2305.04388/) (2023)
- [Counterfactual Explanations without Opening the Black Box: Automated Decisions and the GDPR](https://mlsanity.com/paper/1711.00399/) (2017)
- [Quantifying Language Models' Sensitivity to Spurious Features in Prompt Design or: How I learned to start worrying about prompt formatting](https://mlsanity.com/paper/2310.11324/) (2023)
- [FinBERT: Financial Sentiment Analysis with Pre-trained Language Models](https://mlsanity.com/paper/1908.10063/) (2019)
- [Explainability for Large Language Models: A Survey](https://mlsanity.com/paper/2309.01029/) (2023)
- [Good Debt or Bad Debt: Detecting Semantic Orientations in Economic Texts](https://mlsanity.com/paper/1307.5336/) (2013)
- [Benchmarking Zero-shot Text Classification: Datasets, Evaluation and Entailment Approach](https://mlsanity.com/paper/1909.00161/) (2019)
- [From Anecdotal Evidence to Quantitative Evaluation Methods: A Systematic Review on Evaluating Explainable AI](https://mlsanity.com/paper/2201.08164/) (2022)
- [Sentiment Analysis in the Era of Large Language Models: A Reality Check](https://mlsanity.com/paper/2305.15005/) (2023)
- [FinGPT: Open-Source Financial Large Language Models](https://mlsanity.com/paper/2306.06031/) (2023)
- [Zero-Shot Learning Through Cross-Modal Transfer](https://mlsanity.com/paper/1301.3666/) (2013)
- [Towards Faithful Model Explanation in NLP: A Survey](https://mlsanity.com/paper/2209.11326/) (2022)
- [Explainable Artificial Intelligence (XAI) 2.0: A Manifesto of Open Challenges and Interdisciplinary Research Directions](https://mlsanity.com/paper/2310.19775/) (2023)
- [Unleashing the potential of prompt engineering for large language models](https://mlsanity.com/paper/2310.14735/) (2023)
- [Are ChatGPT and GPT-4 General-Purpose Solvers for Financial Text Analytics? A Study on Several Typical Tasks](https://mlsanity.com/paper/2305.05862/) (2023)
- [Learning to Generate Explainable Stock Predictions using Self-Reflective Large Language Models](https://mlsanity.com/paper/2402.03659/) (2024)
- [DUET: Cross-modal Semantic Grounding for Contrastive Zero-shot Learning](https://mlsanity.com/paper/2207.01328/) (2022)
- [Transforming Sentiment Analysis in the Financial Domain with ChatGPT](https://mlsanity.com/paper/2308.07935/) (2023)
- [Synthetic Sample Selection for Generalized Zero-Shot Learning](https://mlsanity.com/paper/2304.02846/) (2023)
- [A Comprehensive Review on Financial Explainable AI](https://mlsanity.com/paper/2309.11960/) (2023)

## Abstract (arXiv)

Can financial news reliably predict short-term stock movements? Despite advances in large language models, this question remains unresolved. We revisit this problem using a zero-shot natural language processing framework, investigating whether models can extract actionable signals from financial news without domain-specific training. We design a structured pipeline that combines zero-shot natural language inference with temporal aggregation, explicitly modelling recency and event-dependent impact horizons when integrating information across articles. To address the need for transparency in high-stakes settings, we introduce a multi-layered explainability framework that links predictions to token-level, article-level, and aggregate evidence, and produces grounded natural language rationales. Across multiple models and prediction horizons, we find that zero-shot approaches consistently fail to outperform simple baselines, with particularly weak performance on negative movements, suggesting deeper structural limitations in mapping news sentiment to short-term price dynamics. However, explainability signals reliably distinguish between trustworthy and unreliable predictions, offering practical value even when accuracy is limited. These findings highlight the limits of zero-shot financial NLP and motivate a shift toward decision-support systems that prioritise transparency and uncertainty awareness. Code: https://github.com/alimert05/zero-shot-stock-xai