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Text Mining and the Information Content of Bank of Canada Communications

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Author Info

  • Scott Hendry
  • Alison Madeley

Abstract

This paper uses Latent Semantic Analysis to extract information from Bank of Canada communication statements and investigates what type of information affects returns and volatility in short-term as well as long-term interest rate markets over the 2002-2008 period. Discussions about geopolitical risk and other external shocks, major domestic shocks (SARS and BSE), the balance of risks to the economic projection, and various forward looking statements are found to significantly affect market returns and volatility, especially for short-term markets. This effect is over and above that from the information contained in any policy interest rate surprise.

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File URL: http://www.bankofcanada.ca/wp-content/uploads/2010/11/wp10-31.pdf
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Bibliographic Info

Paper provided by Bank of Canada in its series Working Papers with number 10-31.

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Length: 53 pages
Date of creation: 2010
Date of revision:
Handle: RePEc:bca:bocawp:10-31

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Related research

Keywords: Financial markets; Monetary policy implementation;

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References

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  1. Andersen, Torben G. & Bollerslev, Tim & Diebold, Francis X. & Vega, Clara, 2007. "Real-time price discovery in global stock, bond and foreign exchange markets," Journal of International Economics, Elsevier, vol. 73(2), pages 251-277, November.
  2. Balke, Nathan S & Petersen, D'Ann, 2002. "How Well Does the Beige Book Reflect Economic Activity? Evaluating Qualitative Information Quantitatively," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 34(1), pages 114-36, February.
  3. Refet Gürkaynak & Brian Sack, 2005. "Do Actions Speak Louder Than Words?The Response of Asset Prices to Monetary Policy Actions and Statements," Computing in Economics and Finance 2005 323, Society for Computational Economics.
  4. David O. Lucca & Francesco Trebbi, 2009. "Measuring Central Bank Communication: An Automated Approach with Application to FOMC Statements," NBER Working Papers 15367, National Bureau of Economic Research, Inc.
  5. Madeline Zavodny & Donna K. Ginther, 2003. "Does the Beige Book move financial markets?," Working Paper 2003-3, Federal Reserve Bank of Atlanta.
  6. Michelle Bligh & Gregory D. Hess, 2006. "A Quantitive Assessment of the Qualitative Aspects of Chairman Greenspan's Communications," Computing in Economics and Finance 2006 213, Society for Computational Economics.
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Cited by:
  1. Scott Hendry, 2012. "Central Bank Communication or the Media’s Interpretation: What Moves Markets?," Working Papers 12-9, Bank of Canada.
  2. Julien Allard & Marco Catenaro & Jean-Pierre Vidal & Guido Wolswijk, 2012. "Central bank communication on fiscal policy," Working Paper Series 1477, European Central Bank.

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