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Is Volatility in Fed Sentiment a Useful Signal?

Prattle provides sentiment data from central bank communications. I explored their Central Bank Sentiment Dataset, which contains weekly sentiment data from many central banks around the globe (though I focused on the Federal Reserve Bank). The sentiment data wraps up all publications of the Fed from every week (between about 1998 and 2015) into a score representing the market sentiment of the Fed that week.

In a previous notebook, I looked for relationships between Fed sentiment and prices of various macro-tracking ETFs. I follow up that investigation with this one, in which I construct a volatility metric for Fed sentiment, and look for relationships between Fed sentiment volatility and the volatilities of various macro-tracking ETFs. I found weak but nonetheless significant correlations, thus affirming the results of the previous notebook.

Please let me know if you have any interesting ideas regarding Fed sentiment that I should work on next!

Prattle's data is currently not publicly accessible, so if you want access to it to run your own experiments, or have any questions, please feel free to reach out to [email protected].

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