Market Sentiment and Exchange Rate Directional Forecasting

Vasilios Plakandaras, Theophilos Papadimitriou, Periklis Gogas, K. Diamantaras
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引用次数: 25

Abstract

The microstructural approach to the exchange rate market claims that order flows on a currency can accurately reflect the short-run dynamics of its exchange rate. In this paper, instead of focusing on order flows analysis we employ an alternative microstructural approach: We focus on investors' sentiment on a given exchange rate as a possible predictor of its future evolution. As a proxy of investors' sentiment we use StockTwits posts, a message board dedicated to finance. Within StockTwits investors are asked to explicitly state their market expectations. We collect daily data on the nominal exchange rate of four currencies against the U.S. dollar and the extracted market sentiment for the year 2013. Employing econometric and machine learning methodologies we develop models that forecast in out-of-sample exercise the future direction of the four exchange rates. Our empirical findings reject the Efficient Market Hypothesis even in its weak form for all four exchange rates. Overall, we find evidence that investors' sentiment as expressed in public message boards can be an additional source of information regarding the future directional movement of the exchange rates to the ones proposed by economic theory.
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市场情绪与汇率方向预测
汇率市场的微观结构方法声称,一种货币的订单流动可以准确地反映其汇率的短期动态。在本文中,我们没有关注订单流分析,而是采用了另一种微观结构方法:我们关注投资者对给定汇率的情绪,将其作为其未来演变的可能预测因素。作为投资者情绪的代表,我们使用StockTwits帖子,这是一个专门讨论金融的留言板。在StockTwits中,投资者被要求明确地陈述他们的市场预期。我们收集了四种货币对美元名义汇率的每日数据,并提取了2013年的市场情绪。采用计量经济学和机器学习方法,我们开发了模型,在样本外练习中预测四种汇率的未来方向。我们的实证研究结果拒绝了有效市场假说,即使是在所有四种汇率的弱形式下。总的来说,我们发现有证据表明,投资者在公共留言板上表达的情绪可以作为经济理论提出的汇率未来方向运动的额外信息来源。
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