Signal in the Noise: Trump Tweets and the Currency Market

67 Pages Posted: 4 Jan 2021 Last revised: 27 Nov 2023

See all articles by Ilias Filippou

Ilias Filippou

Washington University in St. Louis - John M. Olin Business School

Arie Eskenazi Gozluklu

University of Warwick - Finance Group

My T. Nguyen

Washington University in St Louis, John M. Olin Business School

Ganesh Viswanath-Natraj

Warwick Business School

Date Written: December 24, 2020

Abstract

In this paper, we conduct a textual analysis of Trump tweets. Our method extracts the signal from the noise, by identifying the subset of tweets that contain information on macroeconomic policy or trade content. Informative tweets result in a USD appreciation and a decline in intraday volatility, reflecting Trump's optimistic views on the U.S. economy. These effects persist after controlling for macroeconomic announcements. We rationalize our findings within a model of Bayesian traders that interpret Trump tweets as a public signal in the FX market. Currency returns are driven by a bias between the public signal and speculators' expectations.

Keywords: Foreign exchange market, textual analysis, Trump, X (Twitter)

JEL Classification: F31, G12, G15

Suggested Citation

Filippou, Ilias and Gozluklu, Arie Eskenazi and T. Nguyen, My and Viswanath-Natraj, Ganesh, Signal in the Noise: Trump Tweets and the Currency Market (December 24, 2020). Available at SSRN: https://ssrn.com/abstract=3754991 or http://dx.doi.org/10.2139/ssrn.3754991

Ilias Filippou (Contact Author)

Washington University in St. Louis - John M. Olin Business School ( email )

One Brookings Drive
Campus Box 1133
St. Louis, MO 63130-4899
United States

Arie Eskenazi Gozluklu

University of Warwick - Finance Group ( email )

Warwick Business School
Coventry, CV4 7AL
Great Britain

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

My T. Nguyen

Washington University in St Louis, John M. Olin Business School ( email )

Room 274 Simon Hall
Washington University in St. Louis
St. Louis, MO 63130
United States
6188183228 (Phone)

Ganesh Viswanath-Natraj

Warwick Business School ( email )

Coventry CV4 7AL
United Kingdom
CV4 7AL (Fax)

HOME PAGE: http://https://ganeshvnatraj.netlify.com

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