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Measuring uncertainty through word vector representations

Author

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  • José Daniel Aromí

    (Universidad de Buenos Aires, Facultad de Ciencias Económicas, IIEP-Baires)

Abstract

Uncertainty is approximated processing economic press content from 1900 through 2017. The indicator exploits word vector representations that are trained to identify terms that are closely related to uncertainty. The resulting index co-moves with alternative proxies for uncertainty and spikes around crisis episodes. In-sample and out-of-sample forecasting exercises indicate that the proposed metric provides valuable information on future levels of expected stock market volatility (VIX). This informational gain is not observed when simpler text processing techniques are implemented.

Suggested Citation

  • José Daniel Aromí, 2017. "Measuring uncertainty through word vector representations," Económica, Departamento de Economía, Facultad de Ciencias Económicas, Universidad Nacional de La Plata, vol. 63, pages 135-156, January-D.
    • Handle: RePEc:lap:journl:609
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    File URL: https://revistas.unlp.edu.ar/Economica/article/view/5074/4248
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    Cited by:

    1. J. Daniel Aromí, 2022. "Medición de Incertidumbre Económica en Redes Sociales en Base a Modelos de Procesamiento de Lenguaje Natural," Working Papers 179, Red Nacional de Investigadores en Economía (RedNIE).
    2. Charemza, Wojciech & Makarova, Svetlana & Rybiński, Krzysztof, 2022. "Economic uncertainty and natural language processing; The case of Russia," Economic Analysis and Policy, Elsevier, vol. 73(C), pages 546-562.

    More about this item

    Keywords

    uncertainty; forecast; volatility.;
    All these keywords.

    JEL classification:

    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling
    • G1 - Financial Economics - - General Financial Markets

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