Mispricing Narratives after Social Unrest

Bocar A. Ba, Abdoulaye Ndiaye, Roman Rivera and Alexander Whitefield

No 32730, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We study how negative sentiment around an industry impacts beliefs and behaviors, focusing on demands for racial justice after the murder of George Floyd and the salience of the “defund the police” movement. We assess stakeholder beliefs on the impact of protests on the stock prices of police-affiliated firms. In our survey experiment, laypeople and finance professionals predicted more negative stock price outcomes when they lacked details on the products supplied by such firms. Exposure to narratives about the context of the protests further reduced the prediction accuracy of these groups. In contrast, product information improved the prediction accuracy of respondents. Turning to real-life behavior, we find that mutual funds exposed to protests were 20% less likely to hold police stocks, after the protests, than funds in areas without protests. Political support for maintaining police funding, though in the majority, declined by 4.3 percentage points in protest areas. The salience of the “defund the police” narrative led to significant overreactions in both financial predictions and real-life behavior.

JEL-codes: D72 D74 D84 G41 (search for similar items in EconPapers)
Date: 2024-07
New Economics Papers: this item is included in nep-exp and nep-pol
Note: LE POL
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.nber.org/papers/w32730.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:
Working Paper: Mispricing Narratives after Social Unrest (2024)
Working Paper: Mispricing Narratives after Social Unrest (2024)
Working Paper: Mispricing Narratives after Social Unrest (2024)
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:32730

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w32730
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 ().