U.S. Populist Rhetoric and Currency Returns, CEPR Discussion Paper No. DP15054

(with Ilias Filippou, Arie E. Gozluklu, and Mark P. Taylor)

We develop a novel measure of U.S. populist rhetoric. Aggregate Populist Rhetoric (APR) Index spikes around populist events. We decompose the APR Index into sub-indices. We show that APR Index and International Relations sub-index are priced in the cross-section of currency excess returns. Currencies that perform well (badly) when U.S. populist rhetoric is high yield low (high) expected excess returns. Investors require a risk premium for holding currencies that underperform in times of rising U.S. populist rhetoric, especially in the post-crisis period. A strategy that buys (sells) currencies with low (high) exposure to U.S. populism offers high Sharpe ratios and strong diversification benefits.

Presentation: PhD Workshop on Quantitative Finance and Econometrics (Manchester, 2019), Finance Management Association International Conference (New York, virtual 2020), AFA PhD Poster Session (Chicago, virtual 2021), 2nd Frontiers of Factor Investing Virtual Conference (Lancaster 2021), Midwest Finance Association Conference (Chicago, virtual 2021)

The Information Content of Trump Tweets and the Currency Market

(with Ilias Filippou, Arie E. Gozluklu, and Ganesh Viswanath-Natraj)

Using textual analysis, we identify the set of Trump tweets that contain information on macroeconomic policy, trade or exchange rate content. We then analyse the effects of Trump tweets on the intraday trading activity of foreign exchange markets, such as trading volume, volatility and FX spot returns. We find that Trump tweets reduce speculative trading, with a corresponding decline in trading volume and volatility, and induce a bias reflecting Trump’s (optimistic) views on the U.S. economy. We rationalise these results within a model of Trump tweets revealing economic content as a public signal that reduces disagreement among speculators.

Presentation: Warwick Business School Brown Bag (Warwick, 2020), 37th International Conference of the French Finance Association (Paris, virtual 2021), 34th Australasian Finance and Banking Conference (Sydney, virtual 2021), AFA PhD Poster Session (Boston, virtual 2022), Queen Mary Behavioural Finance Seminar (London, 2022)

U.S. Fiscal News Index and the Cross-section of Stock Returns (Job Market Paper)

Implementing textual analysis, this paper constructs the Fiscal News Index based on a large sample of U.S. Presidential Speeches between February 1929 and December 2020. The Fiscal News Index is a priced risk factor in the cross-section of stock returns. Investors demand higher expected returns for holding stocks with high exposure to Fiscal News Index. A long short trading strategy based on this risk factor generates an average excess return of 8.2% annually with a Sharpe ratio of 0.86.