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Natural Disaster Effects on Popular Sentiment Toward Finance

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  • Jha, Manish
  • Liu, Hongyi
  • Manela, Asaf

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.

Suggested Citation

  • Jha, Manish & Liu, Hongyi & Manela, Asaf, 2021. "Natural Disaster Effects on Popular Sentiment Toward Finance," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 56(7), pages 2584-2604, November.
    • Handle: RePEc:cup:jfinqa:v:56:y:2021:i:7:p:2584-2604_10
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    Cited by:

    1. Yuriy Gorodnichenko & Tho Pham & Oleksandr Talavera, 2023. "The Voice of Monetary Policy," American Economic Review, American Economic Association, vol. 113(2), pages 548-584, February.
    2. Nino Buliskeria & Jaromir Baxa & Tomas Sestorad, 2023. "Uncertain Trends in Economic Policy Uncertainty," Working Papers 2023/16, Czech National Bank.
    3. Elisa Navarra, 2022. "Stock Market Response to Firms’ Misconduct," Working Papers ECARES 2022-40, ULB -- Universite Libre de Bruxelles.
    4. Zhang, Cheng & Lee, Yun-Chi & Ho, Kung-Cheng & Shen, Xixi, 2023. "Influence of institutional differences on trade credit use during pandemics," Pacific-Basin Finance Journal, Elsevier, vol. 77(C).

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