Tell Me a Story: Quantifying Economic Narratives and Their Role during COVID-19

76 Pages Posted: 20 Dec 2020 Last revised: 3 Mar 2021

See all articles by Daniel Borup

Daniel Borup

Aarhus University, CREATES, DFI

Jorge Hansen

Aarhus University; CREATES; DFI

Benjamin Liengaard

Aarhus University - CREATES

Erik Christian Montes Schütte

Aarhus University - CREATES; DFI

Date Written: December 19, 2020

Abstract

We retrieve the most salient COVID-19 narratives and examine their relation to behavioral, political, financial, and real economic conditions that characterize the pandemic period. Using textual analysis, we elicit thirteen narratives from daily and real-time open-ended questionnaires presented to a large number of US stockholders prior to and during the first wave of the pandemic (February through June, 2020) and quantify their propagation and tone over time. The narratives span distinct aspects that define the period, e.g., "supply disruption", "investor fear", "stay at home", "infection worry", and "fiscal and monetary policy intervention". They have strong behavioral implications for human mobility at their homes, workplaces, and shops, and partisan disagreement about the stock market is significantly reduced whenever policy-related narratives prevail. A network analysis shows that narratives drive unexpected fluctuations in the economy and financial markets and that they are themselves shaped by these. Narratives also manifest in expected returns and marginal utility as they carry significant risk premia in financial markets.

Keywords: Narrative economics, COVID-19, textual analysis, network analysis, Google Mobility, latent Dirichlet allocation, risk premia, partisan disagreement

JEL Classification: C55, D91, E44, E71

Suggested Citation

Borup, Daniel and Hansen, Jorge and Liengaard, Benjamin and Schütte, Erik Christian Montes, Tell Me a Story: Quantifying Economic Narratives and Their Role during COVID-19 (December 19, 2020). Available at SSRN: https://ssrn.com/abstract=3752116 or http://dx.doi.org/10.2139/ssrn.3752116

Daniel Borup (Contact Author)

Aarhus University, CREATES, DFI ( email )

School of Business and Social Sciences
Fuglesangs Alle 4
Aarhus V, 8210
Denmark

Jorge Hansen

Aarhus University ( email )

Nordre Ringgade 1
DK-8000 Aarhus C, 8000
Denmark

CREATES ( email )

School of Economics and Management
Building 1322, Bartholins Alle 10
DK-8000 Aarhus C
Denmark

DFI ( email )

Benjamin Liengaard

Aarhus University - CREATES ( email )

School of Economics and Management
Building 1322, Bartholins Alle 10
DK-8000 Aarhus C
Denmark

Erik Christian Montes Schütte

Aarhus University - CREATES ( email )

School of Economics and Management
Building 1322, Bartholins Alle 10
DK-8000 Aarhus C
Denmark

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