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The Sentiment of the Fed

Author

Listed:
  • Michel Fuksa

    (AGH University of Science and Technology)

  • Didier Sornette

    (Swiss Finance Institute and ETH Zürich)

Abstract

Sentiment analysis is applied to the Federal Reserve's documents relating to the Federal Open Market Committee (FOMC). A new method of rating the sentiment of texts is developed through the creation of a 100 000 word sentiment dictionary, and is used to estimate the sentiment of the Beige Book and FOMC statements and minutes. Results show that, under Greenspan’s tenure, the sentiment of the Beige Book anticipated the sentiment of the FOMC minutes while, during the Bernanke era, the sentiment of the Beige Book anticipates the sentiment of the FOMC statement. This finding suggests that the Beige Book, usually made public three weeks before a FOMC meeting, may contain information useful in anticipating policy decisions.

Suggested Citation

  • Michel Fuksa & Didier Sornette, 2013. "The Sentiment of the Fed," Swiss Finance Institute Research Paper Series 13-01, Swiss Finance Institute.
    • Handle: RePEc:chf:rpseri:rp1301
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    File URL: http://ssrn.com/abstract=2191937
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    More about this item

    Keywords

    economics; Federal Reserve; Federal Open Market Committee; Beige Book; word sentiment dictionary; prediction;
    All these keywords.

    JEL classification:

    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G00 - Financial Economics - - General - - - General
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation

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