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War Discourse and Disaster Premium: 160 Years of Evidence from the Stock Market

Author

Listed:
  • David Hirshleifer
  • Dat Mai
  • Kuntara Pukthuanthong

Abstract

Using a semisupervised topic model on 7 million New York Times articles spanning 160 years, we test whether topics of media discourse predict future stock market excess returns to test rational and behavioral hypotheses about market valuation of disaster risk. Media discourse data address the challenge of sample size even when disasters are rare. Our methodology avoids look-ahead bias and addresses semantic shifts. Our discourse topics positively predicts market excess returns, with War having an out-of-sampleof 1.35%. We call this effect the war return premium. The war return premium has increased in more recent time periods.

Suggested Citation

  • David Hirshleifer & Dat Mai & Kuntara Pukthuanthong, 2025. "War Discourse and Disaster Premium: 160 Years of Evidence from the Stock Market," The Review of Financial Studies, Society for Financial Studies, vol. 38(2), pages 457-506.
    • Handle: RePEc:oup:rfinst:v:38:y:2025:i:2:p:457-506.
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    File URL: http://hdl.handle.net/10.1093/rfs/hhae081
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    More about this item

    Keywords

    G10; G11; G12; G14; G17; G41; N00;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets
    • N00 - Economic History - - General - - - General

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