By sifting through the artificial intelligence of the archives of Quebec newspapers from the past 100 years, a team of researchers has succeeded in identifying an index that measures the concern of our ancestors in the face of economic crises.
Posted at 4:00 p.m.
“It is a research project that falls under the theme of “sentometrics”, therefore which aims to extract information from unstructured data, in this case logs, to try to measure the useful quantities in finance and economics,” explains HEC Montréal professor David Ardia, who is a pioneer in the field.
The frequency of “triplets”
As part of his most recent study, Professor Ardia and his colleagues Keven Bluteau and Alaa Kassem dusted off the archives of four French-language media, namely The sun, The dutyRadio Canada and The Press, for a period dating back to 1913. Their algorithm identified the bits of text that contained words relating to the economy, politics or even uncertainty. “If a portion of text contains at least one word for each of these dimensions, then it can reasonably be said that it is an article that talks about the uncertainty linked to economic policy”, explains David Ardia.
IMAGE PROVIDED BY A CENTURY OF ECONOMIC POLICY UNCERTAINTY THROUGH THE FRENCH-CANADIAN LENS, ECONOMICS LETTERS, 2021
“If a portion of text contains at least one word for each of these dimensions, then it can reasonably be said that it is an article that talks about the uncertainty linked to economic policy”, explains David Ardia.
Basically, the greater the frequency of “triplets” for a given day, the more it can be inferred that economic uncertainty was high on that day. However, as all the media do not talk about the economy as often or in the same way, their contribution must be weighted so that the index is not distorted by media that are more alarmist or more specialized than others.
This method had already been used by American and Canadian researchers, but this is the first time that it has been applied to French-language media in Canada.
“We had to translate the word banks into French and also add concepts specifically from here, such as ‘Bank of Canada’ or ‘TPS’, for example,” says David Ardia. It was also necessary to adapt to the specific format of Quebec archives and to make the algorithms able to recognize what constitutes a single and same article among undifferentiated columns of text.
A useful hint today
IMAGE PROVIDED BY A CENTURY OF ECONOMIC POLICY UNCERTAINTY THROUGH THE FRENCH-CANADIAN LENS, ECONOMICS LETTERS, 2021
The black line on this graph corresponds to the index of political uncertainty in the economy measured by David Ardia and his colleagues. It can be seen that the index actually peaks during economic crises, such as the stock market crash of 1929 or the financial crisis of 2008.
Once everything is said, is this famous index financed by the Ivado Institute effective? To find out, David Ardia compared it to more traditional macroeconomic indicators, such as the inflation rate and gross domestic product (GDP): the result is conclusive. “What we see, he notes, is that the index peaks during periods when we know that we have had economic upheavals. »
As often, the interest of scrutinizing the past is to try to predict the future. By using today’s media rather than archives, it is possible to obtain an index that measures current economic concern. A team of Belgian researchers has already created such an index based on Walloon and Flemish media, distributed free on the internet and updated daily. David Ardia believes that such an index would be interesting for Quebec investors, but he was unable to transpose the Belgian project here due to copyright.