What Can We Learn from Euro-Dollar Tweets?

62 Pages Posted: 5 Apr 2017

See all articles by Vahid Gholampour

Vahid Gholampour

Bucknell University

Eric van Wincoop

University of Virginia - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: March 2017

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.

Suggested Citation

Gholampour, Vahid and van Wincoop, Eric, What Can We Learn from Euro-Dollar Tweets? (March 2017). NBER Working Paper No. w23293, Available at SSRN: https://ssrn.com/abstract=2946699

Vahid Gholampour (Contact Author)

Bucknell University ( email )

Economics Department,
Bucknell University
Lewisburg, PA 17837
United States

HOME PAGE: http://www.vahidg.com

Eric Van Wincoop

University of Virginia - Department of Economics ( email )

Rouss Hall 114
P.O. Box 400182
Charlottesville, VA 22904-4182
United States
804-924-3997 (Phone)
804-982-2904 (Fax)

National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
United States

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