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What Hundreds of Economic News Events Say About Belief Overreaction in the Stock Market / Francesco Bianchi, Sydney C. Ludvigson, Sai Ma.
- Format:
- Book
- Author/Creator:
- Bianchi, Francesco.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w32301.
- NBER working paper series no. w32301
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2024.
- Summary:
- We measure the nature and severity of a variety of belief distortions in market reactions to hundreds of economic news events using a new methodology that synthesizes estimation of a structural asset pricing model with algorithmic machine learning to quantify bias. We estimate that investors systematically overreact to perceptions about multiple fundamental shocks in a macro-dynamic system, generating asymmetric compositional effects when several counteracting shocks occur simultaneously in real-world events. We show that belief overreaction to all shocks can lead the market to over- or underreact to events, amplifying or dampening volatility.
- Notes:
- Print version record
- April 2024.
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