Hostname: page-component-586b7cd67f-t7fkt Total loading time: 0 Render date: 2024-11-23T22:48:19.778Z Has data issue: false hasContentIssue false
  • English
  • Français

Natural Disaster Effects on Popular Sentiment Toward Finance

Published online by Cambridge University Press:  23 July 2021

Manish Jha Open the ORCID record for Manish Jha [Opens in a new window] ,
Hongyi Liu  and
Asaf Manela
Manish Jha*
Affiliation:
Georgia State University Robinson College of Business
Hongyi Liu
Affiliation:
Washington University in St. Louis Arts and [email protected]
Asaf Manela
Affiliation:
Washington University in St. Louis Olin Business School and IDC [email protected]
*
[email protected] (corresponding author)
Get access Rights & Permissions [Opens in a new window]

Abstract

We use a text-based measure of popular sentiment toward finance to study how finance sentiment responds to rare historical disasters and to the ongoing COVID-19 pandemic. Finance sentiment declines after epidemics and earthquakes but rises following severe droughts, floods, and landslides. These heterogeneous effects suggest finance sentiment responds differently to the realization of insured versus uninsured risks. Finance sentiment declines at the start of the COVID-19 pandemic, but recovers in countries that experienced high stock markets returns and that responded with large fiscal spending. Finance sentiment seems to depend on the insurance provided by private markets and by public finance.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 56 , Issue 7: JFQA Symposium on the Consequences of the COVID-19 Pandemic for Firms and Capital Markets , November 2021 , pp. 2584 - 2604
Copyright
© The Author(s), 2021. Published by Cambridge University Press on behalf of the Michael G. Foster School of Business, University of Washington

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Footnotes

We thank Ran Duchin and Jarrad Harford for detailed comments. We also thank Yves-Paul Auffray, Joseph Kloecker, David Lindequist, Rodrigo Moser, Andrea Paloschi, Rita Podledneva, Tatiana Vdovina, Juan Ignacio Vizcaino, and seminar participants at the University of Connecticut, Virtual Finance Seminar, and Washington University in St. Louis for helpful comments. Computations used the Washington University Center for High Performance Computing, which is partially funded by NIH grant S10 OD018091.

References

Agarwal, S.; Amromin, G.; Ben-David, I.; Chomsisengphet, S.; Piskorski, T.; and Seru, A.. “Policy Intervention in Debt Renegotiation: Evidence from the Home Affordable Modification Program.” Journal of Political Economy, 125 (2017), 654–712.CrossRefGoogle Scholar
Aksoy, C. G.; Eichengreen, B.; and Saka, O.. “The Political Scar of Epidemics.” NBER Working Paper No. 27401 (2020).CrossRefGoogle Scholar
Baker, S.; Bloom, N.; and Terry, S.. “Using Disasters to Estimate the Impact of Uncertainty.” NBER Working Paper No. 27167 (2020).CrossRefGoogle Scholar
Barro, R. J.; Ursúa, J. F.; and Weng, J.. “The Coronavirus and the Great Influenza Pandemic: Lessons from the ‘Spanish Flu’ for the Coronavirus’s Potential Effects on Mortality and Economic Activity.” NBER Working Paper No. 26866 (2020).CrossRefGoogle Scholar
Benmelech, E., and Frydman, C., “The 1918 Influenza Did Not Kill the US Economy.” Washington, DC: CEPR (Apr. 29, 2020).Google Scholar
Benmelech, E., and Tzur-Ilan, N.. “The Determinants of Fiscal and Monetary Policies During the Covid-19 Crisis.” NBER Working Paper No. 27461 (2020).CrossRefGoogle Scholar
Buchholz, U.; Buda, S.; Reuß, A.; Haas, W.; and Uphoff, H.. “Influenza Pandemic Deaths in Germany from 1918 to 2009. Estimates Based on Literature and Own Calculations.” Bundesgesundheitsblatt, Gesundheitsforschung, Gesundheitsschutz, 59 (2016), 523–536.CrossRefGoogle ScholarPubMed
Chetty, R.; Friedman, J. N.; Hendren, N.; and Stepner, M.. “Real-Time Economics: A New Platform to Track the Impacts of COVID-19 on People, Businesses, and Communities Using Private Sector Data.” Tech. rep., Mimeo (2020).Google Scholar
Consiglio nazionale delle ricerche. Bollettino d’informazioni (1930).Google Scholar
Correia, S.; Luck, S.; and Verner, E.. “Pandemics Depress the Economy, Public Health Interventions Do Not: Evidence from the 1918 Flu.” Available at https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3561560  (2020).CrossRefGoogle Scholar
D’Acunto, F.; Prokopczuk, M.; and Weber, M.. “Historical Antisemitism, Ethnic Specialization, and Financial Development.” Review of Economic Studies, 86 (2019), 1170–1206.CrossRefGoogle Scholar
de la Rosa, V. M. “The Persuasive Use of Rhetorical Devices in the Reporting of ‘Avian Flu.’” Vigo International Journal of Applied Linguistics, (2008), 87–106.Google Scholar
Devlin, J.; Chang, M.-W.; Lee, K.; and Toutanova, K.. “BERT: Pre-Training of Deep Bidirectional Transformers for Language Understanding.” arXiv:1810.04805 [cs], (2018).Google Scholar
Diamond, D. W., and Rajan, R. G.. “Liquidity Risk, Liquidity Creation, and Financial Fragility: A Theory of Banking.” Journal of Political Economy, 109 (2001), pp. 287–327.CrossRefGoogle Scholar
Eisensee, T., and Stromberg, D.. “News Droughts, News Floods, and U. S. Disaster Relief.” Quarterly Journal of Economics, 122 (2007), 693–728.CrossRefGoogle Scholar
Fornasin, A.; Breschi, M.; and Manfredini, M.. “Spanish Flu in Italy: New Data, New Questions.” Le Infezioni in Medicina, 26 (2018), 97–106.Google Scholar
Gennaioli, N.; La Porta, R.; Lopez-de-Silanes, F.; and Shleifer, A.. “Trust and Insurance Contracts.” NBER Working Paper No. 27189 (2020).CrossRefGoogle Scholar
Giannetti, M., and Wang, T. Y.. “Corporate Scandals and Household Stock Market Participation.” Journal of Finance, 71 (2016), 2591–2636.CrossRefGoogle Scholar
Guénel, J. “Spanish Influenza in France from 1918–1919.” Histoire Des Sciences Medicales, 38 (2004), 165–175.Google ScholarPubMed
Guiso, L.; Sapienza, P.; and Zingales, L.. “Does Local Financial Development Matter?” Quarterly Journal of Economics, 119 (2004), 929–969.CrossRefGoogle Scholar
Guiso, L.; Sapienza, P.; and Zingales, L.. “Does Culture Affect Economic Outcomes?” Journal of Economic Perspectives, 20 (2006), 23–48.CrossRefGoogle Scholar
Guiso, L.; Sapienza, P.; and Zingales, L.. “Trusting the Stock Market.” Journal of Finance, 63 (2008), 2557–2600.CrossRefGoogle Scholar
Guiso, L.; Sapienza, P.; and Zingales, L.. “Corporate Culture, Societal Culture, and Institutions.” American Economic Review, 105 (2015), 336–339.CrossRefGoogle Scholar
Gurun, U. G.; Stoffman, N.; and Yonker, S. E.. “Trust Busting: The Effect of Fraud on Investor Behavior.” Review of Financial Studies, 31 (2018), 1341–1376.CrossRefGoogle Scholar
Hamborg, F.; Meuschke, N.; Breitinger, C.; and Gipp, B.. “news-please: A Generic News Crawler and Extractor.” 15th International Symposium of Information Science (ISI 2017), 218–223.Google Scholar
Jha, M.; Liu, H.; and Manela, A.. “Does Finance Benefit Society? A Language Embedding Approach.” Working Paper, Washington University in St. Louis (2020).CrossRefGoogle Scholar
Johnson, N. P. A. S., and Mueller, J.. “Updating the Accounts: Global Mortality of the 1918–1920 ‘Spanish’ Influenza Pandemic.” Bulletin of the History of Medicine, 76 (2002), 105–115.CrossRefGoogle ScholarPubMed
Jordà, Ò.; Schularick, M.; and Taylor, A. M.. “Macrofinancial History and the New Business Cycle Facts.” NBER Macroeconomics Annual, 31 (2017), 213–263.CrossRefGoogle Scholar
Jordà, Ò.; Singh, S. R.; and Taylor, A. M.. “Longer-Run Economic Consequences of Pandemics.” NBER Working Paper No. 26934 (2020).CrossRefGoogle Scholar
Kozlowski, A. C.; Taddy, M.; and Evans, J. A.. “The Geometry of Culture: Analyzing the Meanings of Class Through Word Embeddings.” American Sociological Review, 84 (2019), 905–949.CrossRefGoogle Scholar
Levine, R.; Lin, C.; and Xie, W.. “The African Slave Trade and Modern Household Finance.” SSRN Scholarly Paper ID 3031310, Social Science Research Network, Rochester, NY (2019).Google Scholar
McCloskey, D. N. Bourgeois Equality: How Ideas, Not Capital or Institutions, Enriched the World. Chicago, IL: University of Chicago Press (2016).Google Scholar
Mokyr, J. A Culture of Growth: The Origins of the Modern Economy, Princeton University Press (2016).CrossRefGoogle Scholar
Mongey, S.; Pilossoph, L.; and Weinberg, A.. “Which Workers Bear the Burden of Social Distancing Policies?” NBER Working Paper No. 27085 (2020).CrossRefGoogle Scholar
Ousley, C. Galveston in Nineteen Hundred: The Authorized and Official Record of the Proud City of the Southwest as It Was Before and After the Hurricane of September 8, and a Logical Forecast of Its Future. La Crosse, WI: Brookhaven Press (1900).Google Scholar
Sapienza, P., and Zingales, L.. “A Trust Crisis.” International Review of Finance, 12 (2012), 123–131.CrossRefGoogle Scholar
Sapienza, P., and Zingales, L.. “Economic Experts versus Average Americans.” American Economic Review, 103 (2013), 636–642.CrossRefGoogle Scholar
Scism, L. “Companies Hit by Covid-19 Want Insurance Payouts. Insurers Say No.” Wall Street Journal (June 30, 2020).Google Scholar
Spolaore, E., and Wacziarg, R.. “How Deep Are the Roots of Economic Development?” Journal of Economic Literature, 51 (2013), 325–369.CrossRefGoogle Scholar
Stulz, R. M., and Williamson, R.. “Culture, Openness, and Finance.” Journal of Financial Economics, 70 (2003), 313–349.CrossRefGoogle Scholar
Trilla, A.; Trilla, G.; and Daer, C.. “The 1918 ‘Spanish Flu’ in Spain.” Clinical Infectious Diseases, 47 (2008), 668–673.CrossRefGoogle Scholar
Verdickt, G. “The Effect of War Risk on Managerial and Investor Behavior: Evidence from the Brussels Stock Exchange in the Pre-1914 Era.” Journal of Economic History, 80 (2020), 629–669.CrossRefGoogle Scholar
Walsh, M. W. “Coronavirus Will Cost Businesses Billions. Insurance May Not Help.” The New York Times (Mar. 5, 2020).Google Scholar
Zingales, L. “Presidential Address: Does Finance Benefit Society?” Journal of Finance, 70 (2015), 1327–1363.CrossRefGoogle Scholar