Relationship between Greece Bailout Sentiment and Greece Bond Spread

Tuesday, 4 August 2016
Fernando Pratama  InfoTrie, Singapore

Analysis of the Greece Bailout Sentiment

This report discusses the relationship between the Greece bailout sentiment and the Greece bond spread against US bond. Ten-year government yields are used as data. The Greece government bond yield is obtained through this URL and the US government bond yield is obtained through the quantmod package. The yield spread is calculated by subtracting Greece yield with US yield. Here is the yield spread plot for the last three months.

Greece Yield Spread Sentiment Analysis

The sentiment data is obtained through querying InfoTrie articles based o the combination of economics, legal, politics, and security keywords. The articles are then classified into their categories by using support vector machine algorithm. Here are the plots of daily sentiment average for each category.

In order to find a relationship between Greece bailout news and Greece yield spread, firstly we extract all the news that contain word “bailout” from economics articles and calculate the daily average sentiment. Intuitively, we expect low sentiment results in higher Greece yield spread and vice versa.

Average Sentiment Review

Linear regression between yield spread and lagged average sentiments are fitted. Let the Greece yield spread as the target and lagged average sentiment from one to five days as features. Negative values on lagged average sentiments parameters will be the evident for the intuition. Here are the bailout plot and the sample of preprocessed data:

Greek Bailout Sentiment Analysis

In order to find the relationship between Greece bailout news and Greece yield spread, firstly we extract all the news that contain word “bailout” from economics articles and calculate the daily average sentiment. Intuitively, we expect low sentiment results in higher Greece yield spread and vice versa.

Linear regression between yield spread and lagged average sentiments are fitted. Let the Greece yield spread as the target and lagged average sentiment from one to five days as features. Negative values on lagged average sentiments parameters will be the evident for the intuition. Here are the bailout plot and the sample of preprocessed data:

Greek Bailout Sentiment Analysis

greece_10 ave_sentiment_1 ave_sentiment_2 ave_sentiment_3 ave_sentiment_4 ave_sentiment_5
8.89 5.2 1.0 8.0 2.0 3.333333
8.69 7.0 5.2 1.0 8.0 2.000000
8.16 1.0 7.0 5.2 1.0 8.000000
8.64 1.0 1.0 7.0 5.2 1.000000
8.88 5.0 1.0 1.0 7.0 5.200000
9.03 8.0 5.0 1.0 1.0 7.000000

Greek Bailout

Conclusion

As a conclusion, we could say that the intercept and lag of 1, 2, and 3 day daily average sentiment are significant parameters in the model. The estimated coefficients of lagged daily sentiment are negatives which confirm the intuition.

Discover FinSentS! | Check our I-Feed API| Try our Excel Plugin

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.