Explaining the asymmetric S&P 500 equity index in five themes: The success and failure of macro narratives

A.G. Malliaris, Mary Malliaris and Mark S. Rzepczynski

The Journal of Economic Asymmetries, 2025, vol. 31, issue C

Abstract: Economists often use narratives that focus on a limited number of variables to describe stock market behavior. We use a neural network methodology to evaluate the appropriateness of five common narratives. Four narratives address the themes of monetary policy and financial conditions, the real macroeconomy, the global economy, and the stock market fundamentals. The fifth is a unified theme combining the best features from the previous four-macro narratives. Theme based neural network models highlight the successes and periodic failures of macro factor narratives. This paper confirms the usefulness of the narrative themes proposed to explain the asymmetric behavior of the S&P 500 Index. The monetary and unified themes perform the best.

Keywords: Asymmetry of stock market returns; Business cycles; Monetary policy; Real economy; Fundamentals; Neural networks (search for similar items in EconPapers)
JEL-codes: E10 E32 E44 E58 E62 R31 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:joecas:v:31:y:2025:i:c:s1703494925000155

DOI: 10.1016/j.jeca.2025.e00415

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