Stock market literature on narratives

Nicholas Mangee ()

Chapter 5 in Narrative Analytics and Stock Market Forecasting, 2025, pp 56-64 from Edward Elgar Publishing

Abstract: Nobel Laureate Robert Shiller has spawned a literature enlisting narrative economics to help explain historical episodes of economic and financial significance. The studies that followed have maintained the view that narratives are incompatible with investor rationality. As Shiller and co-authors have stated, the results are “affirming the interpretation that the crash narrative measure is capturing narrativity rather than fundamental factors” (Goetzmann et al., 2023). A strict behavioral finance treatment of narratives would position the effects as symptomatic of illogic. Yes, it is natural to seek whether narratives have extraordinary effects surrounding extreme events, such as financial crises. But narrative economics is young enough of a field to circumvent the paradigm dichotomy prevailing for the past four decades in macroeconomic and finance research. This chapter surveys the recent literature by focusing on the key features of extant studies that differentiate them from the forecasting component of the Novelty-Narrative Hypothesis (NNH).

Keywords: Narrative economics; Stock market narratives; Behavioral finance narratives; Novelty-Narrative Hypothesis (search for similar items in EconPapers)
Date: 2025
ISBN: 9781035357598
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