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What can we Learn from Euro-Dollar Tweets?

Listed author(s):
  • Vahid Gholampour
  • Eric van Wincoop

We use 633 days of tweets about the Euro/dollar exchange rate to determine their information content and the profitability of trading based on Twitter Sentiment. We develop a detailed lexicon used by FX traders to translate verbal tweets into positive, negative and neutral opinions. The methodologically novel aspect of our approach is the use of a model with heterogeneous private information to interpret the data from FX tweets. After estimating model parameters, we compute the Sharpe ratio from a trading strategy based on Twitter Sentiment. The Sharpe ratio outperforms that based on the well-known carry trade and is precisely estimated.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 23293.

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Date of creation: Mar 2017
Handle: RePEc:nbr:nberwo:23293
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  1. Wang, Jiang, 1994. "A Model of Competitive Stock Trading Volume," Journal of Political Economy, University of Chicago Press, vol. 102(1), pages 127-168, February.
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