War Discourse and the Cross Section of Expected Stock Returns

David Hirshleifer, Dat Mai and Kuntara Pukthuanthong

No 31348, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: A war-related factor model derived from textual analysis of media news reports explains the cross section of expected stock returns. Using a semi-supervised topic model to extract discourse topics from 7,000,000 New York Times stories spanning 160 years, the war factor predicts the cross section of returns across test assets derived from both traditional and machine learning construction techniques, and spanning 138 anomalies. Our findings are consistent with assets that are good hedges for war risk receiving lower risk premia, or with assets that are more positively sensitive to war prospects being more overvalued. The return premium on the war factor is incremental to standard effects.

JEL-codes: G0 G02 G1 G10 G11 G4 G41 (search for similar items in EconPapers)
Date: 2023-06
New Economics Papers: this item is included in nep-big, nep-fdg, nep-fmk, nep-his and nep-rmg
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