Main Street's Pain, Wall Street's Gain

90 Pages Posted: 27 Dec 2021 Last revised: 8 Apr 2023

See all articles by Nancy R. Xu

Nancy R. Xu

Boston College, Carroll School of Management

Yang You

The University of Hong Kong

Date Written: April 7, 2023

Abstract

When Initial Jobless Claims (IJC) are higher than expected, investors may expect more generous federal government support and drive up aggregate stock prices through the expected cash flow channel, leading to a novel ``Main Street pain, Wall Street gain'' phenomenon. Our empirical investigation shows that this phenomenon emerges when news articles on IJC announcements mention fiscal policy keywords more. During the COVID-19 period, firms/industries that get mentioned more in stimulus bills, have higher obligated funding amounts, or are expected to suffer more in fundamentals show higher stock returns when bad IJC news arrives. Labor news is one driver of fiscal policy expectations.

Keywords: return dynamics, macroeconomic news announcement, fiscal policy expectation, Covid-19, textual analysis, cross section

JEL Classification: G12, E62, E63, H3

Suggested Citation

Xu, Nancy R. and You, Yang, Main Street's Pain, Wall Street's Gain (April 7, 2023). Available at SSRN: https://ssrn.com/abstract=3980774 or http://dx.doi.org/10.2139/ssrn.3980774

Nancy R. Xu (Contact Author)

Boston College, Carroll School of Management ( email )

Carroll School of Management
140 Commonwealth Avenue
Chestnut Hill, MA 02467-3808
United States

HOME PAGE: http://www.nancyxu.net

Yang You

The University of Hong Kong ( email )

Pokfulam Road
Hong Kong, HK
China

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