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Explaining the asymmetric S&P 500 equity index in five themes: The success and failure of macro narratives

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  • Malliaris, A.G.
  • Malliaris, Mary
  • Rzepczynski, Mark S.

Abstract

Economists often use narratives that focus on a limited number of variables to describe stock market behavior. We use a neural network methodology to evaluate the appropriateness of five common narratives. Four narratives address the themes of monetary policy and financial conditions, the real macroeconomy, the global economy, and the stock market fundamentals. The fifth is a unified theme combining the best features from the previous four-macro narratives. Theme based neural network models highlight the successes and periodic failures of macro factor narratives. This paper confirms the usefulness of the narrative themes proposed to explain the asymmetric behavior of the S&P 500 Index. The monetary and unified themes perform the best.

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  • Malliaris, A.G. & Malliaris, Mary & Rzepczynski, Mark S., 2025. "Explaining the asymmetric S&P 500 equity index in five themes: The success and failure of macro narratives," The Journal of Economic Asymmetries, Elsevier, vol. 31(C).
    • Handle: RePEc:eee:joecas:v:31:y:2025:i:c:s1703494925000155
    DOI: 10.1016/j.jeca.2025.e00415
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    Keywords

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    JEL classification:

    • E10 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - General
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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