Emotions and Subjective Crash Beliefs

William Goetzmann, Dasol Kim and Robert Shiller

No 32589, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Over the past two decades, respondents to the Shiller Investor Confidence Surveys have assessed the probability of a catastrophic stock market crash to be much higher than the historical frequency of such events. We decompose these crash probabilities into fundamental and subjective components and use a large language model to estimate the emotional content of respondent narratives. The subjective crash component is strongly associated with high negative affect. We use respondent location to test how news of unusual exogenous shocks affects crash belief formation. The results are consistent the risk-as-feelings hypothesis and suggest a path by which emotional response to news about salient events may play a role in the scale and variation in investor beliefs about rare disasters.

JEL-codes: E03 G00 G02 G11 G23 (search for similar items in EconPapers)
Date: 2024-06
New Economics Papers: this item is included in nep-rmg
Note: AP
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.nber.org/papers/w32589.pdf (application/pdf)
Access to the full text is generally limited to series subscribers, however if the top level domain of the client browser is in a developing country or transition economy free access is provided. More information about subscriptions and free access is available at http://www.nber.org/wwphelp.html. Free access is also available to older working papers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:32589

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w32589
The price is Paper copy available by mail.

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().