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Text Mining and the Information Content of Bank of Canada Communications

  • Scott Hendry
  • Alison Madeley

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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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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Web page: http://www.bank-banque-canada.ca/

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  1. Torben G. Andersen & Tim Bollerslev & Francis X. Diebold & Clara Vega, 2007. "Real-Time Price Discovery in Global Stock, Bond and Foreign Exchange Markets," CREATES Research Papers 2007-20, School of Economics and Management, University of Aarhus.
  2. 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.
  3. 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.
  4. Nathan S. Balke & D'Ann Petersen, 1998. "How well does the Beige Book reflect economic activity? Evaluating qualitative information quantitatively," Working Papers 9802, Federal Reserve Bank of Dallas.
  5. Gurkaynak, Refet S & Sack, Brian & Swanson, Eric T, 2005. "Do Actions Speak Louder Than Words? The Response of Asset Prices to Monetary Policy Actions and Statements," MPRA Paper 820, University Library of Munich, Germany.
  6. Madeline Zavodny & Donna K. Ginther, 2003. "Does the Beige Book move financial markets?," FRB Atlanta Working Paper No. 2003-3, Federal Reserve Bank of Atlanta.
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