Quantifying Narratives and their Impact on Financial Markets
Journal of Portfolio Management, Forthcoming
25 Pages Posted: 8 Aug 2022 Last revised: 4 Nov 2022
Date Written: July 15, 2022
This paper introduces a media-coverage-based approach to quantify narratives and develops methodologies to explain the extent to which narratives drive financial markets and returns of investment portfolios. We show that media-derived narratives may contain predictive information for market returns beyond traditional macro indicators. Finally, we demonstrate that narrative indicators can be used to enhance asset allocation strategies and to gain or hedge exposure to narratives by constructing portfolios of narrative-sensitive assets.
Keywords: Media Sentiment, Investor Behavior, Economic Themes, Narratives, Market Drivers
JEL Classification: G11, G12, G14, G17, G41
Suggested Citation: Suggested Citation