FINTECH THRUST SEMINAR | Economic Narratives, Populist Sentiment, and Asset Pricing
Supporting the below United Nations Sustainable Development Goals:支持以下聯合國可持續發展目標：支持以下联合国可持续发展目标：
Economic Narratives, Populist Sentiment, and Asset Pricing
Abstract:
We examine the investment management and asset pricing implications of textual economic narratives and public populist sentiment. First, we propose a novel economic narrative-managed portfolio utilizing a large news corpus and machine learning models, which achieve an economically large out-of-sample R2 of 2.61% and annual utility gains of up to 10%. The predictive power of narratives stems from their ability to capture information related to disaster risk, and investors exhibit sticky beliefs in response to the information contained in narratives. Second, we construct a monthly populist sentiment index using over one million Wall Street Journal article. Populist sentiment surged during Donald Trump's election campaigns, and stocks with high betas to changes in the populist sentiment index significantly underperform those with low betas by 1.12% per month. The populist sentiment beta premium seems to stem from investors’ biased beliefs about future cash flows.
Fuwei Jiang is the Professor of Finance at the School of Economics and WISE, Xiamen University. He is also the Department Chair of Finance and holds the MOE's Changjiang Scholar Professorship. His main research area lies in asset pricing, behavioral finance, FinTech, machine learning, textual analytics, and Chinese markets. He has published in Journal of Financial Economics, Review of Financial Studies, Management Science, Journal of Econometrics, Journal of Business and Economic Statistics, among others. His papers on FinTech are among the most highly cited papers published in JFE and RFS, and awarded the MOE’s Higher Education Outstanding Scientific Research Output Awards, and the Zhang Peigang Award for Young Scholars in Economics.