Levent Bulut, PhD

During this time period, I earned the following awards and recognitions:

* 2019 Affordable Learning Georgia Mini-Grant for Ancillary Materials Creation and Revision, Board of Regents of the University System of Georgia

* 2019 Valdosta State University Faculty Scholarship

* 2018 Rea and Lillian Steele Grant, Valdosta State University

* 2018 Valdosta State University Faculty Scholarship

During this time period, I earned the following awards and recognitions:

* 2015-2017 The Scientific and Technological Research Council of Turkey (TUBITAK), Postdoctoral Reintegration Fellowship

* 2015 Ipek University Travel Fund

Authors: Bulut, L. & Dogan, C., In this paper, we use Google Trends data to proxy macro fundamentals that are related to two conventional structural determination of exchange rate models: purchasing power parity model and the monetary exchange rate determination model. We assess forecasting performance of Google Trends based models against random walk null on Turkish Lira–US Dollar exchange rate for the period of January 2004 to August 2015. We offer a three-step methodology for query selection for macro fundamentals in Turkey and the US. In out-of-sample forecasting, results show better performance against no-change random walk predictions for specifications both when we use Google Trends data as the only exchange rate predictor or augment it with exchange rate fundamentals. We also find that Google Trends data has limited predictive power when used in year-on-year growth rate format.

In this paper, we use Google Trends data for exchange rate forecasting in the context of a broad literature review that ties the exchange rate movements with macroeconomic fundamentals. The sample covers 11 OECD countries’ exchange rates for the period from January 2004 to June 2014. In out‐of‐sample forecasting of monthly returns on exchange rates, our findings indicate that the Google Trends search query data do a better job than the structural models in predicting the true direction of changes in nominal exchange rates. We also observed that Google Trends‐based forecasts are better at picking up the direction of the changes in the monthly nominal exchange rates after the Great Recession era (2008–2009). Based on the Clark and West inference procedure of equal predictive accuracy testing, we found that the relative performance of Google Trends‐based exchange rate predictions against the null of a random walk model is no worse than the purchasing power parity model. On the other hand, although the monetary model fundamentals could beat the random walk null only in one out of 11 currency pairs, with Google Trends predictors we found evidence of better performance for five currency pairs. We believe that these findings necessitate further research in this area to investigate the extravalue one can get from Google search query data.

In Monte Carlo experiment with simulated data, we show that as a point forecast criterion, the Clark and West's (2006) unconditional test of mean squared prediction errors does not reflect the relative performance of a superior model over a relatively weaker one. The simulation results show that even though the mean squared prediction errors of a constructed superior model is far below a weaker alternative, the Clark- West test does not reflect this in their test statistics. Therefore, studies that use this statistic in testing the predictive accuracy of alternative exchange rate models, stock return predictability, inflation forecasting, and unemployment forecasting should not weight too much on the magnitude of the statistically significant Clark-West tests statistics.