Post by ehsanulh125 on Jan 9, 2024 6:55:03 GMT
In their classic book Animal Spirits , George Akerlof and Robert Shiller (2010) suggested that the most important factors that move the markets are the stories of the given "era". The value of the stock market and our asset prices are not only explained by our stories, they are also shaped by our stories. The Nobel Memorial Prize-winning author couple cites the stock market boom that lasted until 2000 as an example, which was caused by the appearance of the Internet in 1994 and the emotional state surrounding it, the trust in technological development. The development of technology is continuous in all other areas as well. Agricultural and engineering achievements do not make the headlines in magazines, countless statistics are not published about them, and they do not cause stock market frenzy.
The stories are therefore Buy Bulk SMS Service not equally attractive, but they definitely influence the functioning of the economy. Stories spread like a virus among actors in the economy, and like epidemiologists, there is room for the use of mathematical models to predict the course of an epidemic. Our data analysis tools undergo continuous development, and the limits of our computing capacities are constantly pushed. Important new elements of the analysis toolkit are text mining and natural language processing ( NLP ) techniques, with which large amounts of data can be processed and interpreted, which was not possible before. An important source (mine) of text mining is central bank communication, which often moves the markets.
In the case of the USA, the largest movements in the government securities and stock markets are typically grouped around Federal Reserve announcements. Using intraday data, Gurkaynak, Sack, and Swanson (2004) investigated to what extent these swings depend on changes in the key interest rate and to what extent the communication associated with it. The authors find that 75% of the movement of 2-year and 5-year government securities is explained by the statements of the FOMC (Fed's decision-making body) and only 25% by changes in the key rate. Of course, this does not imply that communication is an independent central bank tool. The instruments exert their effect through the financial markets' expectations for the future. The cited study also argues that communication can be particularly useful for influencing the yield of long-term assets, so that when faced with a zero nominal interest rate, its effective application can help stimulate the economy.
The stories are therefore Buy Bulk SMS Service not equally attractive, but they definitely influence the functioning of the economy. Stories spread like a virus among actors in the economy, and like epidemiologists, there is room for the use of mathematical models to predict the course of an epidemic. Our data analysis tools undergo continuous development, and the limits of our computing capacities are constantly pushed. Important new elements of the analysis toolkit are text mining and natural language processing ( NLP ) techniques, with which large amounts of data can be processed and interpreted, which was not possible before. An important source (mine) of text mining is central bank communication, which often moves the markets.
In the case of the USA, the largest movements in the government securities and stock markets are typically grouped around Federal Reserve announcements. Using intraday data, Gurkaynak, Sack, and Swanson (2004) investigated to what extent these swings depend on changes in the key interest rate and to what extent the communication associated with it. The authors find that 75% of the movement of 2-year and 5-year government securities is explained by the statements of the FOMC (Fed's decision-making body) and only 25% by changes in the key rate. Of course, this does not imply that communication is an independent central bank tool. The instruments exert their effect through the financial markets' expectations for the future. The cited study also argues that communication can be particularly useful for influencing the yield of long-term assets, so that when faced with a zero nominal interest rate, its effective application can help stimulate the economy.