Feuerriegel, Stefan
[Verfasser:in]
;
Wolff, Georg
[Sonstige Person, Familie und Körperschaft];
Neumann, Dirk
[Sonstige Person, Familie und Körperschaft]
Anmerkungen:
In: Feuerriegel, Stefan, Georg Wolff, and Dirk Neumann. "News Sentiment and Overshooting of Exchange Rates." Applied Economics 48.44 (2016): 4238-4250
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments 2016 erstellt
Beschreibung:
In a globalised world, the volume of international trade is based on both import and export prices, thereby making a country's economy highly dependent on exchange rates. In order to study exchange rate movements, one frequently exploits the so-called Dornbusch overshooting model. However, the model is controversial from a theoretical point of view: it explains exchange rate movements by a number of fundamental variables but ignores how novel information in the form of news can enter the market. As a remedy, this paper adjusts for information dissemination by performing a multivariate analysis to compare the classical overshooting model with an extended variant that includes news sentiment. Our results show that news sentiment has a substantial explanatory power of 11% of the exchange rate forecasting error variance. In addition, we also find statistical evidence that a shock in news sentiment may lead to overshooting