Impact of Tweet Risks on Global Financial Markets Using the Quantile VAR Model

Document Type : Research Paper

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Faculty of Management and Economics, Tarbiat Modares University, Tehran, Iran

10.22059/ier.2024.366270.1007822

Abstract

This study examines how tweets influence the emotions of investors and how these emotions impact global financial markets. The study applies the Quantile VAR model, a method that captures the dynamics of different quantiles of the conditional distribution, to analyze the data of weekly returns for five financial variables: the U.S. dollar, gold, oil, NASDAQ index, and S&P index, from 2019 to 2023. The study also constructs weighted indices of emotions based on tweets from the US and England, using a sentiment analysis tool. The results reveal a high correlation (95%) between the emotions and the average conditional distribution, indicating that emotions have a significant effect on financial markets. The study also finds that gold and the U.S. dollar are the most vulnerable to emotional shocks, especially during the peak of the COVID-19 pandemic, when fear and uncertainty were widespread. The study emphasizes the importance of addressing the direct impact of emotions on financial markets and urges policymakers and legislators to implement regulations that can protect investors and ensure market stability.
Keywords: Quantile VAR, Investor Emotions, Financial Markets, Tweets, Risks.

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Iranian Economic Review

Articles in Press, Accepted Manuscript
Available Online from 12 February 2024

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