The Federal Reserve’s official website published an article introducing the “Twitter Financial Sentiment Index.” Researchers conducted natural language processing on up to 4.4 million Twitter data to establish a new measure of credit and financial market sentiment, which will help predict changes in monetary policy stance.

The study found that the Twitter Financial Sentiment Index (TFSI) is highly correlated with corporate bond spreads and other price- and survey-based financial condition indicators. Overnight Twitter financial sentiment helps predict stock market returns the next day. The index contains information that helps predict changes in the U.S. monetary policy stance. For example, a deterioration in Twitter financial sentiment the day before the FOMC statement is released can predict the size of a tightening monetary policy shock. (Planet Daily)