How novelty and narratives drive the stock market : black swans, animal spirits, and scapegoats / Nicholas Mangee, Georgia Southern University.

Format:

Book

Author/Creator:

Mangee, Nicholas, 1983- author.

Series:

Studies in new economic thinking.

Studies in new economic thinking

Language:

English

Subjects (All):

Investments--Psychological aspects.

Investments.

Stock exchanges--Psychological aspects.

Stock exchanges.

Physical Description:

1 online resource (xxvii, 422 pages) : digital, PDF file(s).

Edition:

1st ed.

Place of Publication:

Cambridge : Cambridge University Press, 2021.

Language Note:

English

Summary:

'Animal spirits' is a term that describes the instincts and emotions driving human behaviour in economic settings. In recent years, this concept has been discussed in relation to the emerging field of narrative economics. When unscheduled events hit the stock market, from corporate scandals and technological breakthroughs to recessions and pandemics, relationships driving returns change in unforeseeable ways. To deal with uncertainty, investors engage in narratives which simplify the complexity of real-time, non-routine change. This book assesses the novelty-narrative hypothesis for the U.S. stock market by conducting a comprehensive investigation of unscheduled events using big data textual analysis of financial news. This important contribution to the field of narrative economics finds that major macro events and associated narratives spill over into the churning stream of corporate novelty and sub-narratives, spawning different forms of unforeseeable stock market instability.

Contents:

Cover

Half-title

Series information

Title page

Copyright information

Dedication

Contents

List of Figures

List of Tables

Preface

Acknowledgments

Part I Novelty, Narratives, and Instability

1 Stock Market Novelty and Narrative Finance

1.1 Introduction

1.2 The Novelty-Narrative Hypothesis

1.3 Narrative Dynamics and Emotion: Evidence from Other Disciplines

1.4 Textual Analysis, Financial News, and Narratives

1.5 The KU Indices

1.6 Statistical Analysis of KU and Narrative Data

1.7 The Future of Macro Finance

2 Unpredictably Unstable

2.1 Introduction

2.2 Narratives and Unforeseeable Change

2.3 Investor Sentiment and Instability

2.4 The Nature of Stock Market Change

2.4.1 Regime-Switching

2.4.2 Parameter Nonconstancy

3 Narratology and Other Disciplines

3.1 Introduction

3.2 How Economists Deal with Narratives and Novelty

3.3 Evidence from Other Disciplines

3.3.1 The Psychological View of Narratology

3.3.2 The Anthropological View

3.3.3 Linguistics and Narratives

3.4 Data Sources and Methodologies Consistent with the Evidence

Part II News Analytics as a Window into Stock Market Instability

4 News Analytics: Novelty, Narratives, and Nonroutine Change

4.1 Introduction

4.2 Benefits of Textual Analysis under Uncertainty

4.3 Stock Market News Reports and Narratives

4.4 News-Based Measures of Uncertainty

4.5 Manual Approaches to Narrative Analysis of News

4.6 Algorithmic Approaches to Narrative Analysis of News

4.7 Introduction to RavenPack News Analytics

5 The Corporate Knightian Uncertainty Index

5.1 Introduction

5.2 Data Description: Event Classification and Corporate KU Events

5.3 Event Record Example

5.4 Baseline Corporate KU Index

6 KU Sentiment, Novelty, and Relevance

6.1 Introduction.

6.2 The KU Sentiment Index

6.3 The KU Novelty Index

6.4 The KU Relevance Index

6.5 The KU Aggregate Event Volume Index

6.6 Identifying Narrative Intensity

7 Diversity of Corporate Uncertainty Events

7.1 Introduction

7.2 KU Event Diversity

7.3 Other KU Groups of Interest

7.4 How the KU Indices Relate to Each Other

8 Macro versus Micro Novelty

8.1 Introduction

8.2 KU Macro Indices

8.3 Corporate versus Macro KU Indices

8.4 Macro Diversity, Narrative Intensity, and Causality

Part III Empirical Evidence for the Novelty-Narrative Hypothesis

9 Corporate Novelty and Stock Market Outcomes

9.1 Introduction

9.2 Correlation between KU and Stock Market Outcomes

9.2.1 KU Diversity and the Gap-Effect

9.3 KU and Variance of Long-Term EPS Growth Forecasts

9.4 KU Diversity and Economic Trends

10 Narrative Intensity and Stock Market Instability

10.1 Introduction

10.2 Market Data and Instability Tests

10.3 Stock Returns and Narrative Intensity

10.4 Volatility and Narrative Intensity

10.5 Trading Volume, Fund Flows, and Narrative Intensity

11 A Manual Novelty-Narrative Scapegoat Analysis

11.1 Introduction

11.2 The Scapegoat Hypothesis

11.2.1 The Scapegoat Model

11.2.2 Econometric Approach with Fixed Coefficients

11.2.3 Unknown and Varying Coefficients

11.2.4 Econometric Approach with Varying Coefficients

11.2.5 Benchmark Models

11.3 Data

11.3.1 Scapegoat Weights

11.3.2 The KU Unobservable Factor

11.3.3 Conventional Data

11.4 Empirical Results

11.4.1 Scapegoat Effects and Fundamentals

11.5 When Does a Fundamental Become a Popular Narrative?

11.5.1 H[sub(1)]-H[sub(3)] and Cointegration

11.6 Conclusion

12 Applying Novelty and Narratives to Other Research

12.1 Introduction

12.2 Novel KU Events in Other Research.

12.2.1 The Present Value Model and KU Adjustment

12.2.2 Adjusting Dividends for KU Effects

12.2.3 CVAR Test for Cointegration

12.3 How Investors May Use Novelty and Narratives

13 The Future of Novelty, Narratives, and Uncertainty in Finance

13.1 Introduction

13.2 What Traditional Approaches Miss about KU Events

13.3 Kuhnian Paradigm Shifts

13.3.1 Conventional Models as Normal Science

13.3.2 The Crisis and Revolution: Preparadigm Shift

13.3.3 Alternative Views and Knightian Uncertainty

14 Concluding Thoughts and Future Research

Appendix A R Code for Bloomberg News Word Cloudand Histogram

Appendix B The Bloomberg News KU Stock Market Project

Appendix C RavenPack Terms for Event Output Record

Appendix D Unscheduled Events from RavenPack

Bibliography

Index.

Notes:

Title from publisher's bibliographic system (viewed on 13 Oct 2021).

ISBN:

1-108-98358-8

1-108-98299-9

1-108-97489-9

OCLC:

1285166285