Part I. Novelty, Narratives and Instability: 1. Narrative finance and stock market novelty; 2. Unpredictably unstable; Part II. News Analytics as a Window into Stock Market Instability: 3. Narratology and other disciplines; 4. News anaytics: novelty, narratives and non-routine change; 5. The corporate Knightian uncertainty index; 6. KU Sentiment, novelty and relevance; 7. Diversity of corporate uncertainty events; 8. Macro versus micro novelty; Part III. Empirical Evidence for the Novelty-Narrative Hypothesis: 9. Corporate novelty and stock market outcomes; 10. Narrative intensity and stock market instability; 11. A manual novelty-narrative scapegoat analysis; 12. Applying novelty and narratives to other research; 13. The future of novelty, narratives and uncertainty in finance; 14. Concluding thoughts and future research; Appendices; Bibliography; Index.
The novelty-narrative hypothesis is used to understand stock market instability using big data textual analytics of financial news.
Nicholas Mangee is Associate Professor of Finance at Georgia Southern University and Research Associate for the Institute of New Economic Thinking program on Knightian Uncertainty Economics.
'This important book completes a project begun by Keynes long
before The General Theory and overthrows the standard approach to
uncertainty in economics. Its study of narratives, multiple
equilibria, and use of machine learning to extract the contents of
narratives from financial reporting is certain to be of wide
interest and is a real contribution to economics.' George Akerlof,
Nobel Laureate in Economics
'A substantial contribution to operationalizing the narrative approach to analyzing fundamental uncertainty as an ongoing feature of the stock market. Uncertainty prevents the definitive measurement of risk which underpins mainstream macro-finance models. But Mangee shows how the incidence of uncertainty, its causes in unforeseen events, and the way in which markets deal with it through narratives can be analyzed and quantified. The dataset he has built up is a contribution in itself. This is a thoughtful, thoroughly-researched exploration of the narrative approach to embedding fundamental uncertainty in the core of economics and finance. It should be read attentively by theorists, policy-makers, and financial practitioners alike.' Sheila Dow, University of Stirling
'Attempts to escape from economists' equilibrium trap have been hampered by their conceit of dividing expectations into 'rational' and 'irrational'. Nicholas Mangee shows, and shows brilliantly, that in the face of inescapable uncertainty, rational decision-making is necessarily built on 'novelty and narrative', not mathematical probability.' Lord Robert Skidelsky, Warwick University
'It is a fact of life that stock market returns, along with the innovations that frequently drive them, are the outcome of unrepeatable and unforeseeable. This book's Novelty-Narrative Hypothesis helps us understand how these unknowns drive market outcomes. This book is a treasure trove of information and insights into the radical uncertainty that drives so much of our economic experiences. Economists, policy makers, and market participants should take note.' Dennis Snower, G20 Economic Policy Advisor and President of Global Solutions Initiative
'To say that this book is timely is a massive understatement - current events will be dissected with great interest for the coming decade.' Richard Friberg, Stockholm School of Economics
'This book develops the Novelty-Narrative Hypothesis, a highly original approach to empirical examination of stock market outcomes that enables economists, policymakers, and market participants to better understand unforeseeable change and Knightian uncertainty. Mangee provides a hitherto unavailable set of tools for extracting information from historical events and narrative dynamics, which will be invaluable in academic research and teaching as well as in making practical policy and business decisions.' Roman Frydman, New York University
'Mangee provides a solid introduction to a novel approach to explaining equity instability.' Mark S. Rzepczynski, CFA Institute