IT’S NOT WHAT THEY SAY, IT’S HOW THEY SAYIT – THE IMPACT ... · THE SET UP. D.G. OPERATIONS,...
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BORRADOR
IT’S NOT WHAT THEY SAY, IT’S HOW THEYSAY IT – THE IMPACT OF THE TONE OF ECBGOVERNING COUNCIL SPEECHES ONFINANCIAL MARKETSCONOR PARLE
D.G. OPERATIONS, MARKETS AND PAYMENT SYSTEMS
Banca d’ItaliaRome, October, 21st, 2019
Discussion by Ricardo Gimeno
THE SET UP
2D.G. OPERATIONS, MARKETS AND PAYMENT SYSTEMS
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Press Release:
Monetary Policy Decissions
Introductory Statement
Questions & Answers
US Stock Market Openning
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-0,63
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-0,59
-0,57
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RENTABILIDAD DE LA DEUDA PÚBLICA A 10 AÑOS
ALEMANIA 10Y EEUU 10Y (derecha)
Anuncio de la decisión% %14:15 Publ icación detalle medidas
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TIPO DE CAMBIO
EURO/DÓLAR EURO/LIBRA (derecha)
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medidas
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ÍNDICES BURSÁTILES (100 = 12:00h)
IBEX 35 EURO STOXX 50EURO STOXX BANCOS ITALIA BANCOSIGBM BANCOS
14:15Anuncio de la decisiónPubl icación detalle
medidas
THE SET UP
3D.G. OPERATIONS, MARKETS AND PAYMENT SYSTEMS
13:00 14:00 15:00 16:00
13:45 -14:30 Impactof the MonetaryPolicy Decisions
14:30 -15:00 Impact of theIntroductory Statement
(forward guidance)
15:00 -15:30 Impact of the Q&A(FG consistency)
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Δ𝑃𝑃14:3015:00 Δ𝑃𝑃15:00
15:30
THE SET UP
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1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Measuring Sentiment
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Supervised classifications:
1. AFINN Measure
2. Loughran Measure
3. Hawk-Dove Measure
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Measuring Sentiment
6D.G. OPERATIONS, MARKETS AND PAYMENT SYSTEMS
Hawk-Dove Measure:
Dovish Terms: Hawkish Terms:• Accommodation• Recession• Devastation• Unemployment• Downturn
• Business• Economy• Equity• Housing• Inflationary• Manufacturing• Prices• Securities• Toll• Businesses• Employment• Expansion• Income• Investment• Outlook• Production• Slack
• Wage• Demand• Energy• Financial• Indicators• Investments• Output• Recovery• Spending• Wages• Economic• Equities• Growth• Inflation• Labour• Price• Resource• Target
Baseline results
7D.G. OPERATIONS, MARKETS AND PAYMENT SYSTEMS
What is the correlation between:
1. AFINN Sentiment Measure2. Loughran Sentiment Measure
4. Hawk-Dove IndexWhat is the correlation between the topical tone:
1. Economic Analysis
3. Loughran Uncertainty Measure
2. Structural Reforms3. Monetary Policy Information4. Monetary Analysis5. Adminstrative6. Financial Markets
7. Price Information8. Global Macro9. Price Stability10. Fiscal Consolidation11. APP12. Monetary Policy Information 2
Baseline Results
8D.G. OPERATIONS, MARKETS AND PAYMENT SYSTEMS
Sentiment Measures tend to be quite volatile
1. Use different experts with differentjudgements on the hawkish/dovish and positive/negative nature of words. Use Cronbach alpha to measure the Validity
2. Construct confidence intervals bybootstrapping the words used.
3. Filter the signal/noise in the sentimentseries. Select those words with thehigher degree of signal to noise ratio
4. Go unsupervised, by selecting thewords that are better aligned withthemarket reactions.
Ricardo Gimeno ([email protected])
Thank you for your attention!
D.G. OPERATIONS, MARKETS AND PAYMENT SYSTEMS