Related papers: Understanding the Excess Bond Premium
Macroeconomic variables are known to significantly impact equity markets, but their predictive power for price fluctuations has been underexplored due to challenges such as infrequency and variability in timing of announcements, changing…
Equity premium, the surplus returns of stocks over bonds, has been an enduring puzzle. While numerous prior works approach the problem assuming the utility of money is invariant across contexts, our approach implies that in efficient…
We develop an equilibrium theory of attention and politics. In a spatial model of electoral competition where candidates have varying policy preferences, we examine what kinds of political behaviors capture voters' limited attention and how…
The equity risk premium puzzle is that the return on equities has far exceeded the average return on short-term risk-free debt and cannot be explained by conventional representative-agent consumption based equilibrium models. We review a…
An increase in the novelty of news predicts negative stock market returns and negative macroeconomic outcomes over the next year. We quantify news novelty - changes in the distribution of news text - through an entropy measure, calculated…
The goal of this paper is to evaluate the informational content of sentiment extracted from news articles about the state of the economy. We propose a fine-grained aspect-based sentiment analysis that has two main characteristics: 1) we…
The need for timely data analysis for economic decisions has prompted most economists and policy makers to search for non-traditional supplementary sources of data. In that context, text data is being explored to enrich traditional data…
While many models are purposed for detecting the occurrence of significant events in financial systems, the task of providing qualitative detail on the developments is not usually as well automated. We present a deep learning approach for…
This paper defines theoretical lower bounds of uncertainty of observations of macroeconomic variables that depend on statistical moments and correlations of random values and volumes of market trades. Any econometric assessments of…
It has been shown that financial news leads to the fluctuation of stock prices. However, previous work on news-driven financial market prediction focused only on predicting stock price movement without providing an explanation. In this…
Financial markets can be highly sensitive to news, investor sentiment, and economic indicators, leading to important asset price fluctuations. In this study we focus on crude oil, due to its crucial role in commodity markets and the global…
Bond markets respond differently to macroeconomic news compared to equity markets, yet most sentiment models are trained primarily on general financial or equity news data. However, bond prices often move in the opposite direction to…
In this paper, we investigate the effectiveness of conventional and unconventional monetary policy measures by the European Central Bank (ECB) conditional on the prevailing level of uncertainty. To obtain exogenous variation in central bank…
Public announcement dates are used in the green bond literature to measure equity market reactions to upcoming green bond issues. We find a sizeable number of green bond announcements were pre-dated by anonymous information leakages on the…
We develop a resource-efficient methodology for measuring economic outlook in news text that combines document embeddings with synthetic training data generated by large language models. Applied to 27 million news articles, the resulting…
We consider the common setting where one observes probability estimates for a large number of events, such as default risks for numerous bonds. Unfortunately, even with unbiased estimates, selecting events corresponding to the most extreme…
Macroeconomic fluctuations and the narratives that shape them form a mutually reinforcing cycle: public discourse can spur behavioural changes leading to economic shifts, which then result in changes in the stories that propagate. We show…
The relationship between electricity demand and variables such as economic activity and weather patterns is well established. However, this paper explores the connection between electricity demand and social aspects. It further embeds…
Incorporating environmental, social, and governance (ESG) considerations into systematic investments has drawn numerous attention recently. In this paper, we focus on the ESG events in financial news flow and exploring the predictive power…
Through a novel approach, this paper shows that substantial change in stock market behavior has a statistically and economically significant impact on equity risk premium predictability both on in-sample and out-of-sample cases. In line…