Work

Stories that (are) Move(d by) Markets: A Causal Exploration of Market Shocks and Semantic Shifts across Different Partisan Groups

Year: 2025

Type: conference-paper

Abstract: Macroeconomic fluctuations and the narratives that shape them form a mutually reinforcing cycle: public discourse can spur behavioural changes leading to economic shifts, which then result in changes in the stories that propagate.We show that shifts in semantic embedding space can be causally linked to financial market shocks -deviations from the expected market behaviour -using Granger causality tests.Furthermore, we show how partisanship can influence the predictive power of text for market fluctuations and shape reactions to those same shocks.We also provide some evidence that text-based signals are particularly salient during unexpected events such as COVID-19, highlighting the value of language data as an exogenous variable in economic forecasting.Our findings underscore the bidirectional relationship between news outlets and market shocks, offering a novel empirical approach to studying their effect on each other.

DOI: 10.18653/v1/2025.findings-acl.149

Authors: Felix Drinkall, Stefan Zohren, Michael McMahon, Janet B. Pierrehumbert

Institution: University of Oxford

Language: English

Topic: Stock Market Forecasting Methods

Subfield: Management Science and Operations Research

Field: Decision Sciences

Domain: Social Sciences

Open Access status: gold