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Social and Behavioral Sciences Commons

Open Access. Powered by Scholars. Published by Universities.®

2012

Claremont Colleges

Finance

Forecasting Volatility

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Full-Text Articles in Social and Behavioral Sciences

Can Online Sentiment Help Predict Dow Jones Industrial Average Returns?, Aria K. Krumwiede Jan 2012

Can Online Sentiment Help Predict Dow Jones Industrial Average Returns?, Aria K. Krumwiede

CMC Senior Theses

In this paper, we explore the relationship between a Global Mood Time Series, provided by Wall Street Birds, and the Dow Jones Industrial Average (DJIA) from April 2011 to December 2011. My econometric results show that there is no long run equilibrium relationship between the level of global mood and the level of the DJIA. These results apply to the whole period, as well as in the six-month subperiods. Furthermore, daily changes in global mood do not Granger cause DJIA returns. However, changes in global mood do appear to be useful in forecasting the volatility of the DJIA, and my ...