A Primer on Narrative Finance

Abstract

Narrative Finance is a relatively new field that aims to understand the narratives that shape financial markets and how these narratives influence market outcomes. This primer provides a comprehensive overview of the key concepts and terminologies, the history of Narrative Finance, the role of narratives in financial decision-making, and the narrative paradigm in finance. It also discusses the applications of Narrative Finance, including narrative-based risk management, narrative-based portfolio construction, and narrative-based financial regulation. The primer concludes by discussing the implications of the future on the field and the industry, and identifying potential areas for further research. The primer also covers the use of Narrative Finance in sustainable finance, the use of AI, the study of different narratives that shape perceptions of different types of assets and investments, the use of Narrative Finance in emerging markets, and how financial narratives are communicated through different media channels. This primer will be useful for researchers, practitioners, and academics in finance, economics, and the social sciences who are interested in understanding the role of narratives in financial markets and how to apply Narrative Finance in their work.

Keywords: Narrative Finance, Financial Decision-making, Risk Management, Portfolio Construction, Financial Regulation

JEL Classification: G40