Firm forecasting based on firm and market narratives

Nicholas Mangee ()

Chapter 9 in Narrative Analytics and Stock Market Forecasting, 2025, pp 97-130 from Edward Elgar Publishing

Abstract: Does the forecasting power of narratives change as story content targets individual firms? Do market outcomes that display forecasting power change? The present chapter sheds light on these questions by tracking the Google Trends search interest of individual firms listed on the Dow Jones Industrial Average (DJIA) 30. The analysis first presents time-series plots of search intensity for several firms. Peaks in search intensity align with major events relevant for firm prospects. The narrative proxies are then confronted with actual data on future (and past) returns, volatility, and trading volume through conventional tests for correlation and statistical causality. Analysis also considers the ability of firm and market narratives to explain expected returns at 1-, 3-, 6-, 12-, and 26-week horizons. The chapter then considers whether there is out-of-sample forecasting ability that begins when the World Health Organization (WHO) officially declared the end to the COVID-19 pandemic on May 5, 2023.

Keywords: Expected stock returns; Firm-level narrative intensity; Market-adjusted narratives; COVID-19 pandemic end (search for similar items in EconPapers)
Date: 2025
ISBN: 9781035357598
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