TY - JOUR
T1 - The Google trends effect on the behavior of the exchange rate Mexican peso - US dollar
AU - Bustamante, Mario Durán
AU - Del Valle, Adrián Hernández
AU - Ramírez, Ambrosio Ortiz
N1 - Publisher Copyright:
© 2019 Universidad Nacional Autónoma de México
PY - 2019
Y1 - 2019
N2 - We show the advantage of using Google search engine trends to forecast the volatility of the short-term (weekly) exchange rate between the Mexican peso and United States dollar. We perform a comparison of models in the literature that have used Google Trends to examine explanatory variables. Some of the models are based on time series, whereas others are based on the similarity function, which captures the cognitive form of human reasoning. For example, an investor who needs to know the value that a variable will take in the future will take into account relevant, known, and available information, and weigh it to calculate the forecast. We conclude that taking into account the Google Trends variable helps explains partially the behaviour of volatility; and it is necessary to incorporate more aggregation levels. Moreover, to the best of our knowledge, literature on the subject of using Google Trends to explain relevant economic variables is relatively scarce.
AB - We show the advantage of using Google search engine trends to forecast the volatility of the short-term (weekly) exchange rate between the Mexican peso and United States dollar. We perform a comparison of models in the literature that have used Google Trends to examine explanatory variables. Some of the models are based on time series, whereas others are based on the similarity function, which captures the cognitive form of human reasoning. For example, an investor who needs to know the value that a variable will take in the future will take into account relevant, known, and available information, and weigh it to calculate the forecast. We conclude that taking into account the Google Trends variable helps explains partially the behaviour of volatility; and it is necessary to incorporate more aggregation levels. Moreover, to the best of our knowledge, literature on the subject of using Google Trends to explain relevant economic variables is relatively scarce.
KW - Aggregation levels
KW - Empirical similarity
KW - Exchange rate
KW - Google trends
KW - Volatility
UR - http://www.scopus.com/inward/record.url?scp=85064349162&partnerID=8YFLogxK
U2 - 10.22201/fca.24488410e.2018.1710
DO - 10.22201/fca.24488410e.2018.1710
M3 - Artículo
AN - SCOPUS:85064349162
SN - 0186-1042
VL - 64
SP - 1
EP - 14
JO - Contaduria y Administracion
JF - Contaduria y Administracion
IS - 2
ER -