An affine term structure model with Fed chairs’ speeches

Eunmi Ko

Finance Research Letters, 2024, vol. 63, issue C

Abstract: I analyze the impact of the sentiment expressed in speeches by Fed chairs on Treasury bond yields, using an affine term structure model. The speeches by Fed chairs are numerically evaluated to generate three sentiment factors: negative, neutral, and positive. The variance decomposition analysis indicates that sentiment factors account for a considerable portion of the variance in yield forecasts.

Keywords: Central bank communication; Sentiment analysis; Determination of interest rates; Financial markets and the macroeconomy (search for similar items in EconPapers)
JEL-codes: E43 E44 E58 E71 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:63:y:2024:i:c:s1544612324003660

DOI: 10.1016/j.frl.2024.105336

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