The role of sentiment in the US economy: 1920 to 1934

Kabiri, Ali; James, Harold; Landon‐Lane, John; Tuckett, David; Nyman, Rickard

doi:10.1111/ehr.13160

“…For example, a plot of relative sentiment against major events in the lead-up to the global financial crisis shows a precipitous decline in relative sentiment in the year leading up to the failure of Bear Sterns in March 2008. A similar analysis using 1920s data from the Wall Street Journal found that sentiment shocks, beyond economic fundamentals, impacted production and stock values leading up to the Great Depression (Kabiri, James, Landon-Lane, Tuckett, & Nyman, 2023); sentiment likewise appears to account for the slow recovery from the 2008 recession (Carlin & Soskice, 2018).…”

Section: Communicationmentioning

confidence: 97%

Conviction Narrative Theory: A theory of choice under radical uncertainty

Johnson

¹

,

Bilovich²,

Tuckett

³

2022

Self Cite

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Conviction Narrative Theory (CNT) is a theory of choice under radical uncertainty—situations where outcomes cannot be enumerated and probabilities cannot be assigned. Whereas most theories of choice assume that people rely on (potentially biased) probabilistic judgments, such theories cannot account for adaptive decision-making when probabilities cannot be assigned. CNT proposes that people use narratives—structured representations of causal, temporal, analogical, and valence relationships—rather than probabilities, as the currency of thought that unifies our sense-making and decision-making faculties. According to CNT, narratives arise from the interplay between individual cognition and the social environment, with reasoners adopting a narrative that feels ‘right’ to explain the available data; using that narrative to imagine plausible futures; and affectively evaluating those imagined futures to make a choice. Evidence from many areas of the cognitive, behavioral, and social sciences supports this basic model, including lab experiments, interview studies, and econometric analyses. We propose 12 principles to explain how the mental representations (narratives) interact with four inter-related processes (explanation, simulation, affective evaluation, communication), examining the theoretical and empirical basis for each. We conclude by discussing how CNT can provide a common vocabulary for researchers studying everyday choices across areas of the decision sciences.

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“…That is, they examine how confidence indicators can influence industrial production. Most of the research confirms the relationship in this direction, for example [19][20][21][22][23][24]. An example could be the research carried out in the past in the Euro Area by Cizmesija et al [40], where they concluded on the basis of a regression analysis that, in accordance with changes in confidence indicators, it is possible to predict the direction of changes in industrial production because business survey results are available before the official statistics are published.…”

Section: Discussionmentioning

confidence: 98%

“…The relationship between sentiment-based indexes and industrial production has been proven by several studies [19][20][21]. The study of Arisoy [22] specifically investigated the Business Confidence Indicator and concluded that it does have an impact on important macroeconomic variables including industrial production.…”

Section: Literature Reviewmentioning

confidence: 99%

Business Confidence in the Sustainable Manufacturing Sector in the Context of Production, Production Prices, and Interest Rates

Suhányiová,

Suhányi,

Kočišová

2023

Sustainability

2

0

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Business confidence can be a very important predictor of future development and sustainability in a selected industry. It is one of the economic sentiment indicators belonging to the most important indicators of the health of the economy. This paper examines the relationships between the Business Confidence Indicator (BCI) of the manufacturing sector and the production, production prices, and interest rates of two neighbouring countries, the Slovak Republic and Hungary. These relationships are examined within the manufacturing sector because it has long been the driving force of sustainable economic development and has significant spill-over effects on the other sectors of the economy. A cluster analysis is performed with the aim of positioning the selected countries into clusters within the OECD countries in relation to the examined variables. Multiple regression models were used to verify the mentioned relationships between variables, separately for each of the two analysed countries. The coefficients of determination are not too high (Slovakia 0.5 and Hungary 0.38), but in the case of sentiment, they reach higher values than in comparable research. Data from the freely available OECD database was used. It can be concluded that the results show positive relationships between the BCI and the production and long-term interest rates, and negative relationships between the BCI and the Producer Prices Index (PPI) and short-term interest rates. The relationship with the short-term interest rates cannot be confirmed in the case of Hungary. Other differences are also shown in that a higher PPI can negatively affect the BCI more intensively in Hungary (regression coefficient 0.18), and that in the case of the Slovak Republic, it appears that the level of influence of the long-term interest rates on the BCI is higher than that in Hungary (the difference between the regression coefficients is 0.27). Practical implications are stated for relevant institutions in the country in three areas: (1) in support of increasing production; (2) in the regulation and subsidization of input production costs; (3) in the stabilization of the lending behaviour of financial institutions.

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“…For example, a plot of relative sentiment against major events in the lead-up to the global financial crisis shows a precipitous decline in relative sentiment in the year leading up to the failure of Bear Sterns in March 2008. A similar analysis using 1920s data from the Wall Street Journal found that sentiment shocks, beyond economic fundamentals, impacted production and stock values leading up to the Great Depression (Kabiri, James, Landon-Lane, Tuckett, & Nyman, 2023); sentiment likewise appears to account for the slow recovery from the 2008 recession (Carlin & Soskice, 2018).…”

Section: Shared Narratives Propagate Through Social Networkmentioning

confidence: 94%