On the Construction of a Leading Indicator Based on News Headlines for Predicting Greek Deposit Outflows

  • Dimitris Anastasiou Economic Research Division, Alpha Bank, Athens, Greece; Department of Accounting and Finance, Athens University of Economics and Business, Greece.
  • Athanassios Petralias Department of Statistics, Athens University of Economics and Business, Athens, Greece.
Keywords: Bank deposit flows, Bloomberg, News headlines, Sentiment, Uncertainty, Markov regime switching regression, Greece.

Abstract

Employing data in a monthly frequency, with a sample period spanning from 2002 to 2018, the purpose of this study is twofold. First, we construct a novel leading indicator based on news headlines drawn from Bloomberg, and second, examine whether this leading indicator able to capture agents’ sentiment affects Greek bank deposit flows’ trajectory. Employing alternative econometric methodologies, we find that this index proxies for depositors’ crisis sentiment and the higher this index becomes, the higher the depositors’ negative sentiment becomes, leading them to withdraw their bank deposits. Overall, in this work, we show that the last decade’s advances in internet technology, which permit us to have direct access to a vast amount of information such as news headlines, offers the possibility of forecasting critical measures in the economy’s banking system, such as the number of bank deposits, which are of crucial importance. Monetary poly authorities or macroprudential regulators could adapt our model to assess the resilience of a bank or the whole banking sector.

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Published
2021-09-10
How to Cite
Anastasiou, D., & Petralias, A. (2021). On the Construction of a Leading Indicator Based on News Headlines for Predicting Greek Deposit Outflows. International Journal of Business Management and Finance Research, 4(1), 1-11. https://doi.org/10.53935/2641-5313.v4i1.57
Section
Articles