Anxiety, Expectations Stabilization and Intertemporal Markets: Theory, Evidence and Policy

Francesco Carbonero, Jeremy Davies, Ekkehard Ernst, Sayantan Ghosal and Leaza McSorley

Working Papers from Business School - Economics, University of Glasgow

Abstract: Anxiety is a negative emotion experienced today in response to future risk. We model how anxiety impacts on risky investment when expected future returns interact with multiple narratives and strategic uncertainty today. A novel anxiety index is constructed via a sentiment analysis of daily online articles in the Daily Mail, Reuters and Press Association; its plausibility is established by comparing it to the corresponding ONS measure over the Covid-19 pandemic. A SVAR analysis shows that anxiety impacts negatively on stock market volatility, a model prediction. We discuss the welfare implications of lighthouse policies focusing on Brexit and the pandemic.

Keywords: anxiety; investment; uncertainty; strategy; narratives; sentiment; lighthouse; policy; coronacrisis; Brexit (search for similar items in EconPapers)
JEL-codes: C72 D91 E21 E22 I30 (search for similar items in EconPapers)
Date: 2021-06
New Economics Papers: this item is included in nep-big, nep-mac and nep-ore
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Persistent link: https://EconPapers.repec.org/RePEc:gla:glaewp:2021_12

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