Investor's sentiment in predicting the Effective Federal Funds Rate
Artem Meshcheryakov () and
Stoyu Ivanov ()
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Artem Meshcheryakov: San Jose State University
Stoyu Ivanov: San Jose State University
Economics Bulletin, 2017, vol. 37, issue 4, 2767-2796
In this article we study if investor's sentiment measured by an intensity of Google searches may be used to predict future changes of the Effective Federal Funds rate. We find that online searches for â€œfed funds rateâ€ , â€œfed interest rateâ€ , â€œfed reserveâ€ , â€œfed reserve rateâ€ and â€œfederal interest rateâ€ are associated with next week decrease of the Effective Federal Funds Rate. Google searches for â€œfed rate hikeâ€ and â€œfed raise ratesâ€ are associated with next week increase of the Effective Federal Funds Rate even after we control for a number of macroeconomic indicators. We also find that intensity of Google searches is associated with the future decrease of volatility of the Effective Federal Funds rate. This finding can be explained by the reduction of information asymmetry about future changes that leads to a reduced volatility.
Keywords: effective federal funds rate; google search; internet search; investor attention; online search; federal reserve; federal rate; federal funds rate; investor; sentiment; anticipation; forecast; prediction (search for similar items in EconPapers)
JEL-codes: E4 E5 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:ebl:ecbull:eb-16-00751
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