On the Usefulness of Uncertainty Sentiment in Twitter for Financial Markets

Abstract

We examine the volatility dynamics and predictive potency of Twitter-based uncertainty metrics by [1] against major financial assets. Employing a latent factor structure model driven by stochastic volatility in high dimensions, we document a lack of co-movement between uncertainty sentiment on Twitter and market volatility. We also record diminutive predictive power of the same indices, especially in comparison with the more established fear index VIX.