Twitter-based market uncertainty and global stock volatility predictability

This study integrates Twitter-based market uncertainty (TMU) into the predictive framework of daily volatility in twenty international equity markets. The study reveals that TMU has a strong predictive ability for stock volatility from both in- and out-of-sample perspectives. Interestingly, despite Twitter being inaccessible in China, the interconnectedness of global financial markets allows it to indirectly impact China’s stock market volatility. The research also highlights that TMU plays a particularly significant role in forecasting stock market volatility during turbulent periods, such as the COVID-19 epidemic. Furthermore, integrating TMU into the volatility prediction framework leads to an improvement in economic value. These findings are essential for policymakers to develop effective market-stabilizing policies and for investors to enhance the management of their investment portfolios.