Quantifying investor narratives and their role during COVID-19

Daniel Borup Andersen; Jorge Hansen; Benjamin Dybro Liengaard; Erik Christian Montes Schütte

doi:10.1002/jae.2964

Quantifying investor narratives and their role during COVID-19

Daniel Borup Andersen, Jorge Hansen, Benjamin Dybro Liengaard, Erik Christian Montes Schütte^*

^*Corresponding author for this work

Department of Economics and Business Economics

Research output: Contribution to journal/Conference contribution in journal/Contribution to newspaper › Journal article › Research › peer-review

1 Citation (Scopus)

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Abstract

This paper elicits and quantifies narratives from open-ended surveys sent daily to U.S. stockholders during the first wave of the COVID-19 pandemic. Using textual analysis, we extract thirteen narratives and measure their prevalence over time. A validation analysis confirms the behavioral and economic relevance of the retrieved narratives. Moreover, we find that the narratives contain predictive information for future excess stock and bond returns, and this predictability remains when controlling for contemporaneous information stemming from news and social media. Finally, we find evidence that political identity is reflected in the narrative tone.

Original language	English
Journal	Journal of Applied Econometrics
Volume	38
Issue	4
Pages (from-to)	512-532
Number of pages	21
ISSN	0883-7252
DOIs	https://doi.org/10.1002/jae.2964
Publication status	Published - 1 Jun 2023

Keywords

COVID-19
textual analysis
latent Dirichlet allocation
narrative economics

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Quantifying_investor_narratives_JAE_2023_AMAccepted manuscript, 3.13 MB

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abstract = "This paper elicits and quantifies narratives from open-ended surveys sent daily to U.S. stockholders during the first wave of the COVID-19 pandemic. Using textual analysis, we extract thirteen narratives and measure their prevalence over time. A validation analysis confirms the behavioral and economic relevance of the retrieved narratives. Moreover, we find that the narratives contain predictive information for future excess stock and bond returns, and this predictability remains when controlling for contemporaneous information stemming from news and social media. Finally, we find evidence that political identity is reflected in the narrative tone.",

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AB - This paper elicits and quantifies narratives from open-ended surveys sent daily to U.S. stockholders during the first wave of the COVID-19 pandemic. Using textual analysis, we extract thirteen narratives and measure their prevalence over time. A validation analysis confirms the behavioral and economic relevance of the retrieved narratives. Moreover, we find that the narratives contain predictive information for future excess stock and bond returns, and this predictability remains when controlling for contemporaneous information stemming from news and social media. Finally, we find evidence that political identity is reflected in the narrative tone.

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Quantifying investor narratives and their role during COVID-19

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Keywords

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