Tham, Eric (2023) Ambiguous Text. Journal of Behavioral Finance.

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Abstract

Investors infer ambiguity from text in news and social media. A proxy for information ambiguity is developed from text processing and used in regression tests against the S&P 500 returns. A risk-neutral agent model with uniform prior beliefs is developed to explain the ambiguity premium or discount under unfavorable or favorable market conditions agnostic of the ambiguity preferences. The model postulates that the ambiguity premium is often elusive in efficient markets due to returns unpredictability, and the information ambiguity as an omitted variable bias in the fundamental relationship between risks and returns. Empirically, the author finds that news media drives equity prices more than social media except from June 2009 to November 2016.

Item ID:	72728
Item Type:	Article (Research - C1)
ISSN:	1542-7579
Copyright Information:	© 2022 The Institute of Behavioral Finance
Date Deposited:	14 Sep 2022 23:04
FoR Codes:	38 ECONOMICS > 3801 Applied economics > 380102 Behavioural economics @ 50% 38 ECONOMICS > 3801 Applied economics > 380107 Financial economics @ 50%
SEO Codes:	15 ECONOMIC FRAMEWORK > 1505 Microeconomics > 150599 Microeconomics not elsewhere classified @ 100%
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