War Discourse and the Cross-Section of Expected Stock Returns

132 Pages Posted: 14 Jun 2023 Last revised: 3 Apr 2024

See all articles by David Hirshleifer

David Hirshleifer

University of Southern California - Marshall School of Business - Finance and Business Economics Department; National Bureau of Economic Research (NBER)

Dat Mai

University of Missouri at Columbia

Kuntara Pukthuanthong

University of Missouri, Columbia

Multiple version iconThere are 2 versions of this paper

Date Written: April 3, 2024

Abstract

A war-related factor model derived from textual analysis of media news reports explains the cross section of expected stock returns. Using a semi-supervised topic model to extract discourse topics from 7,000,000 New York Times stories spanning 160 years, the war factor predicts the cross section of returns across test assets derived from both traditional and machine learning construction techniques, and spanning 138 anomalies. Our findings are consistent with assets that are good hedges for war risk receiving lower risk premia, or with assets that are more positively sensitive to war prospects being more overvalued. The return premium on the war factor is incremental to standard effects.

Suggested Citation

Hirshleifer, David and Mai, Dat and Pukthuanthong, Kuntara, War Discourse and the Cross-Section of Expected Stock Returns (April 3, 2024). Available at SSRN: https://ssrn.com/abstract=4468542 or http://dx.doi.org/10.2139/ssrn.4468542

David Hirshleifer

University of Southern California - Marshall School of Business - Finance and Business Economics Department ( email )

Marshall School of Business
Los Angeles, CA 90089
United States

HOME PAGE: http://https://sites.uci.edu/dhirshle/

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Dat Mai

University of Missouri at Columbia ( email )

Columbia, MO 65201
United States

HOME PAGE: http://www.maiydat.com/

Kuntara Pukthuanthong (Contact Author)

University of Missouri, Columbia ( email )

Robert J. Trulaske, Sr. College of Business
403 Cornell Hall
Columbia, MO 65211
United States
6198076124 (Phone)

HOME PAGE: https://www.kuntara.net/

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