What can we Learn from Euro-Dollar Tweets?

Vahid Gholampour and Eric van Wincoop

No 23293, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We use 633 days of tweets about the Euro/dollar exchange rate to determine their information content and the profitability of trading based on Twitter Sentiment. We develop a detailed lexicon used by FX traders to translate verbal tweets into positive, negative and neutral opinions. The methodologically novel aspect of our approach is the use of a model with heterogeneous private information to interpret the data from FX tweets. After estimating model parameters, we compute the Sharpe ratio from a trading strategy based on Twitter Sentiment. The Sharpe ratio outperforms that based on the well-known carry trade and is precisely estimated.

JEL-codes: F31 F41 G12 G14 (search for similar items in EconPapers)
Date: 2017-03
New Economics Papers: this item is included in nep-mon and nep-mst
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Citations: View citations in EconPapers (7)

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