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The high frequency impact of economic policy narratives on stock market uncertainty

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  • Perico Ortiz, Daniel

Abstract

This paper investigates the causal relationship between economic policy narratives, derived from President Trump's tweets and tweeting behavior, and stock market uncertainty. To this end, I define different event types based on the occurrence probability of identifted narratives or unusual tweet behaviors. High-frequency market uncertainty responses to different events are recovered using time-series regressions. Events regarding foreign policy, trade, monetary policy, and immigration policy exhibit a signiftcant effect on market uncertainty. Impulse responses become signiftcant between one and three hours after the event occurs, for most of the events. Furthermore, behavior events, such as increases in the tweet or retweeted counts above their average, matter for stock market uncertainty.

Suggested Citation

  • Perico Ortiz, Daniel, 2021. "The high frequency impact of economic policy narratives on stock market uncertainty," FAU Discussion Papers in Economics 02/2021, Friedrich-Alexander University Erlangen-Nuremberg, Institute for Economics.
    • Handle: RePEc:zbw:iwqwdp:022021
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    References listed on IDEAS

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    More about this item

    Keywords

    Twitter; Donald Trump; Economic Narratives; Economic Policy Uncertainty; VIX;
    All these keywords.

    JEL classification:

    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • E71 - Macroeconomics and Monetary Economics - - Macro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on the Macro Economy
    • C54 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Quantitative Policy Modeling

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