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 results suggest that GARCH models of volatility of large-cap indexes, and potentially the market as a whole, could be strengthened by including online sentiment measures of Big Data. Measuring global mood, and quantifying its impacts, can potentially lead to superior portfolio construction as forecasting volatility is an important input in portfolio optimization. The results, as a whole, suggest that Big Data can have important implications for investment decision-making.
| Identifer | oai:union.ndltd.org:CLAREMONT/oai:scholarship.claremont.edu:cmc_theses-1338 |
| Date | 01 January 2012 |
| Creators | Krumwiede, Aria K. |
| Publisher | Scholarship @ Claremont |
| Source Sets | Claremont Colleges |
| Detected Language | English |
| Type | text |
| Format | application/pdf |
| Source | CMC Senior Theses |
| Rights | © 2012 Aria K. Krumwiede |
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