Sustainable Architecture for Finance in Europe (SAFE)
Refine
Year of publication
- 2021 (159) (remove)
Document Type
- Working Paper (87)
- Part of Periodical (66)
- Article (5)
- Periodical (1)
Is part of the Bibliography
- no (159)
Keywords
- Covid-19 (6)
- ESG (6)
- COVID-19 (5)
- monetary policy (4)
- Green Finance (3)
- Sustainability (3)
- climate change (3)
- BRRD (2)
- Bank Capitalization (2)
- Bank Resolution (2)
Institute
- Sustainable Architecture for Finance in Europe (SAFE) (159)
- Wirtschaftswissenschaften (151)
- Center for Financial Studies (CFS) (61)
- House of Finance (HoF) (57)
- Institute for Monetary and Financial Stability (IMFS) (18)
- Foundation of Law and Finance (12)
- Rechtswissenschaft (12)
- Gesellschaftswissenschaften (2)
We focus on the role of social media as a high-frequency, unfiltered mass information transmission channel and how its use for government communication affects the aggregate stock markets. To measure this effect, we concentrate on one of the most prominent Twitter users, the 45th President of the United States, Donald J. Trump. We analyze around 1,400 of his tweets related to the US economy and classify them by topic and textual sentiment using machine learning algorithms. We investigate whether the tweets contain relevant information for financial markets, i.e. whether they affect market returns, volatility, and trading volumes. Using high-frequency data, we find that Trump’s tweets are most often a reaction to pre-existing market trends and therefore do not provide material new information that would influence prices or trading. We show that past market information can help predict Trump’s decision to tweet about the economy.
Recent advances in natural language processing have contributed to the development of market sentiment measures through text content analysis in news providers and social media. The effectiveness of these sentiment variables depends on the imple- mented techniques and the type of source on which they are based. In this paper, we investigate the impact of the release of public financial news on the S&P 500. Using automatic labeling techniques based on either stock index returns or dictionaries, we apply a classification problem based on long short-term memory neural networks to extract alternative proxies of investor sentiment. Our findings provide evidence that there exists an impact of those sentiments in the market on a 20-minute time frame. We find that dictionary-based sentiment provides meaningful results with respect to those based on stock index returns, which partly fails in the mapping process between news and financial returns.