War Discourse and Disaster Premia: 160 Years of Evidence from Stock and Bond Markets

David Hirshleifer, Dat Y. Mai and Kuntara Pukthuanthong

No 31204, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Using a semi-supervised topic model on 7,000,000 New York Times articles spanning 160 years, we test whether topics of media discourse predict future stock market excess returns to test rational and behavioral hypotheses about market valuation of disaster risk. Media discourse data address the challenge of sample size even when disasters are rare. Our methodology avoids look-ahead bias and addresses semantic shifts. Our discourse topics positively predict market excess returns, with War having an out-of-sample R² of 1.35%. We call this effect the war return premium. The war return premium has increased in more recent time periods.

JEL-codes: G0 G00 G01 G02 G1 G10 G11 G13 G4 G41 (search for similar items in EconPapers)
Date: 2023-05
New Economics Papers: this item is included in nep-fdg, nep-fmk and nep-his
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