Book contents
- Frontmatter
- Dedication
- Contents
- List of Figures
- List of Tables
- Preface
- Acknowledgments
- PART I NOVELTY, NARRATIVES, AND INSTABILITY
- PART II NEWS ANALYTICS AS A WINDOW INTO STOCK MARKET INSTABILITY
- PART III EMPIRICAL EVIDENCE FOR THE NOVELTY-NARRATIVE HYPOTHESIS
- 9 Corporate Novelty and Stock Market Outcomes
- 10 Narrative Intensity and Stock Market Instability
- 11 A Manual Novelty-Narrative Scapegoat Analysis
- 12 Applying Novelty and Narratives to Other Research
- 13 The Future of Novelty, Narratives, and Uncertainty in Finance
- 14 Concluding Thoughts and Future Research
- Appendix A R Code for Bloomberg News Word Cloud and 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
12 - Applying Novelty and Narratives to Other Research
from PART III - EMPIRICAL EVIDENCE FOR THE NOVELTY-NARRATIVE HYPOTHESIS
Published online by Cambridge University Press: 23 September 2021
- Frontmatter
- Dedication
- Contents
- List of Figures
- List of Tables
- Preface
- Acknowledgments
- PART I NOVELTY, NARRATIVES, AND INSTABILITY
- PART II NEWS ANALYTICS AS A WINDOW INTO STOCK MARKET INSTABILITY
- PART III EMPIRICAL EVIDENCE FOR THE NOVELTY-NARRATIVE HYPOTHESIS
- 9 Corporate Novelty and Stock Market Outcomes
- 10 Narrative Intensity and Stock Market Instability
- 11 A Manual Novelty-Narrative Scapegoat Analysis
- 12 Applying Novelty and Narratives to Other Research
- 13 The Future of Novelty, Narratives, and Uncertainty in Finance
- 14 Concluding Thoughts and Future Research
- Appendix A R Code for Bloomberg News Word Cloud and 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
Summary
Chapter 12 offers some suggestions about how researchers in economics and finance may apply the KU indices and narrative proxies in their own work moving forward. The present value model for the aggregate stock market is used as a case study wherein the SP500 dividend series is adjusted for the narrative influence from the dividends/earnings unscheduled corporate event group presented in Chapter 7. Cointegration analysis finds that stock market prices and dividends only share a longer-run cointegrating relationship when dividends are adjusted for novelty–narrative effects. The chapter then offers an example applying the baseline KU corporate index interacted with sentiment, novelty, and relevance to a simple trading strategy that shows enhanced returns through a back-testing example where long positions are opened or closed based on moderately high narrative intensity periods.
Keywords
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- How Novelty and Narratives Drive the Stock MarketBlack Swans, Animal Spirits and Scapegoats, pp. 295 - 306Publisher: Cambridge University PressPrint publication year: 2021