A Review of Textual Analysis in Economics and Finance

2014 ◽  
pp. 122-139 ◽  
Author(s):  
Carissa L. Tudor ◽  
Clara Vega
Keyword(s):  
Economic Activity ◽  
Asset Prices ◽  
Textual Analysis ◽  
Asset Price ◽  
Price Volatility ◽  
Informational Content ◽  
Message Board ◽  
Firm Level ◽  
Message Boards ◽  
Cash Flow Volatility

This chapter provides an overview of studies in finance and economics that use automated textual analysis algorithms to analyze the informational content of a wide variety of texts, including journalist’s coverage of news events, management-issued statements, and Internet stock message boards. In these studies, researchers quantify qualitative information with one or more of the following textual tone variables: textual negativity, positivity, and uncertainty. The studies show that textual negativity and positivity conveyed by managers and journalists helps predict future firm level and aggregate economic activity. Textual negativity and positivity, in turn, affect asset prices, although the information is sometimes incorporated with some delay. Textual uncertainty of management-issued information is associated with future cash flow volatility and asset price volatility. In contrast, the textual tone of stock market message board postings is, on average, not very informative in explaining asset prices. The use of automated textual analysis algorithms in finance and economics is a relatively new phenomenon and research in this area is expected to continue to grow.

The Micro and Macro of Managerial Beliefs

2020 ◽  
Author(s):  
Jose Maria Barrero
Keyword(s):  
Rational Expectations ◽  
Asset Price ◽  
Heterogeneous Firms ◽  
Adjustment Costs ◽  
Consumer Welfare ◽  
Sales Growth ◽  
Firm Level ◽  
Managerial Decisions ◽  
Managerial Beliefs ◽  
Growth Volatility

This paper studies how biases in managerial beliefs affect managerial decisions, firm performance, and the macroeconomy. Using a new survey of US managers I establish three facts. (1) Managers are not over-optimistic: sales growth forecasts on average do not exceed realizations. (2) Managers are overprecise (overconfident): they underestimate future sales growth volatility. (3) Managers overextrapolate: their forecasts are too optimistic after positive shocks and too pessimistic after negative shocks. To quantify the implications of these facts, I estimate a dynamic general equilibrium model in which managers of heterogeneous firms use a subjective beliefs process to make forward-looking hiring decisions. Overprecision and overextrapolation lead managers to overreact to firm-level shocks and overspend on adjustment costs, destroying 2.1 percent of the typical firm’s value. Pervasive overreaction leads to excess volatility and reallocation, lowering consumer welfare by 0.5 to 2.3 percent relative to the rational expectations equilibrium. These findings suggest overreaction may amplify asset-price and business cycle fluctuations.

Fifty years of UK asset price volatility

2000 ◽  
Vol 2 (3) ◽  
pp. 63-77 ◽  
Author(s):  
Nicola Anderson ◽  
Francis Breedon
Keyword(s):  
Asset Price ◽  
Price Volatility

scholarly journals Tranching, CDS, and Asset Prices: How Financial Innovation Can Cause Bubbles and Crashes

2012 ◽  
Vol 4 (1) ◽  
pp. 190-225 ◽  
Author(s):  
Ana Fostel ◽  
John Geanakoplos
Keyword(s):  
Asset Prices ◽  
Asset Price ◽  
Financial Innovation ◽  
Underlying Asset

We show how the timing of financial innovation might have contributed to the mortgage bubble and then to the crash of 2007–2009. We show why tranching and leverage first raised asset prices and why CDS lowered them afterward. This may seem puzzling, since it implies that creating a derivative tranche in the securitization whose payoffs are identical to the CDS will raise the underlying asset price, while the CDS outside the securitization lowers it. The resolution of the puzzle is that the CDS lowers the value of the underlying asset since it is equivalent to tranching cash. (JEL E32, E44, G01, G12, G13, G21).

scholarly journals News Shocks and Asset Price Volatility in General Equilibrium

2011 ◽  
Author(s):  
Akito Matsumoto ◽  
Pietro Cova ◽  
Massimiliano Pisani ◽  
Alessandro Rebucci
Keyword(s):  
General Equilibrium ◽  
Asset Price ◽  
Price Volatility ◽  
News Shocks

Asset price volatility and trading volume with rational beliefs

2004 ◽  
Vol 23 (4) ◽  
pp. 795-829 ◽  
Author(s):  
Ho-Mou Wu ◽  
Wen-Chung Guo
Keyword(s):  
Trading Volume ◽  
Asset Price ◽  
Price Volatility ◽  
Rational Beliefs

scholarly journals Asymmetric Macroeconomic Shocks and Asset Price Behaviors in Selected African Countries

2021 ◽  
Vol 11 (2) ◽  
pp. 90
Author(s):  
Saliu Mojeed Olanrewaju ◽  
Ogunleye Edward Oladipo
Keyword(s):  
Real Estate ◽  
Interest Rates ◽  
Asset Prices ◽  
Asset Price ◽  
Panel Cointegration ◽  
African Countries ◽  
Vector Autoregressive ◽  
Macroeconomic Variables ◽  
Real Estate Prices ◽  
The Relationship

This study examines the relationship between Asset prices (Stock and Real estate prices) and Macroeconomic variables in four selected African countries. The study employs the Westerlund Error Correction Based Panel Cointegration test and Eight-variable Structural Vector Autoregressive model to examine the relationship between asset prices and macroeconomic variables. Findings from the study confirm that no long-run relationship exists between both Asset prices and macroeconomic variables. The study equally reveals that portfolio diversification benefits of both stock and real estate markets are more pronounced in the period of a boom than the recession period in Africa. The results also show that GDP growth rate shock exerts a significant impact on both asset prices during expansion and recession periods. The study reveals that foreign interest rates and World oil price shocks are better predictors of both stock and real estate prices during the crisis period than in the expansion period.

scholarly journals PROSPECTS FOR THE DEVELOPMENT OF FOREIGN ECONOMIC ACTIVITY OF THE ENTERPRISES OF AGRARIAN AND INDUSTRIAL COMPLEX

2020 ◽  
pp. 146-159
Author(s):  
Antonina BROYAKA
Keyword(s):  
Foreign Trade ◽  
Economic Activity ◽  
Raw Materials ◽  
Price Volatility ◽  
Global Market ◽  
Positive Trend ◽  
Industrial Complex ◽  
Foreign Markets ◽  
Agricultural Producers ◽  
Safety Standards

The article examines the essence of foreign economic activity of enterprises, the features and prospects of its implementation in the field of agrarian and industrial complex. Based on the conducted analysis, it is proved that agrarian export of Ukraine plays a significant role in the formation of the budget and GDP of the country, since its share in 2018 was 14.2% of GDP and 33.4% of the total national exports of goods. The dynamics of export-import operations of the agrarian sector is explored and it is found that it demonstrates a positive trend in contrast to the general foreign trade balance of Ukraine. The analysis of the agrarian exports structure in 2010-2019 confirms the growth of the share of the majority of agrarian products types sold abroad. However, Ukrainian exports are mainly oriented towards raw materials, which, among other reasons, is associated with technological backwardness and the limited ability of domestic agricultural producers to purchase modern equipment and technologies due to theirs low solvency. The commodity orientation of Ukrainian exports makes the competitive position of Ukraine in foreign markets vulnerable, since the demand for commodities is unstable and is characterized by significant price volatility. The geographical structure of foreign trade in agrarian products and the possibilities of its further diversification are investigated. The majority of Ukrainian products in Europe are purchased in Poland, Italy and Germany. Significant connoisseurs of Ukrainian products are also Turkey, China, India, Egypt. Ukrainian exports should be expanded to Asian and Eastern countries. The key problems that put the brakes on the development of the foreign economic activity of the enterprises of agrarian and industrial complex and hinder the competitiveness increase of domestic agrarian products in the international market are identified. A number of measures are proposed to promote the further development of the foreign economic activity of the enterprises of agrarian and industrial complex, including the development of appropriate strategies taking into account global market trends, harmonization and compliance with the quality and safety standards of agrarian products, improving the innovative component, strengthening state support (including financial) of the export-oriented agrarian enterprises, improving the investment climate, and more.

Do Country-level Creditor Protections Affect Firm-level Debt Structure Concentration?

2021 ◽  
Author(s):  
Kose John ◽  
Mahsa S Kaviani ◽  
Lawrence Kryzanowski ◽  
Hosein Maleki
Keyword(s):  
Debt Structure ◽  
Difference In Differences ◽  
Firm Level ◽  
Creditor Rights ◽  
Country Level ◽  
Bankruptcy Costs ◽  
Cash Flow Volatility ◽  
Cross Country ◽  
Using Data ◽  
Alternative Settings

Abstract We study the effects of country-level creditor protections on the firm-level choice of debt structure concentration. Using data from 46 countries, we show that firms form more concentrated debt structures in countries with stronger creditor protection. We propose a trade-off framework of optimal debt structure and show that in strong creditor rights regimes, the benefit of forming concentrated structures outweighs its cost. Because strong creditor protections increase liquidation bias, firms choose concentrated debt structures to improve the probability of successful distressed debt renegotiations. Firms with ex-ante higher bankruptcy costs, including those with higher intangibility, cash flow volatility, R&D expenses, and leverage exhibit stronger effects. Firms with restricted access to capital are also affected more. A difference-in-differences analysis of firms’ debt structure responses to creditor rights reforms confirms the cross-country results. Our findings are robust to alternative settings and a battery of robustness checks.

Sign in / Sign up

Export Citation Format

Share Document