How Novelty and Narratives Drive the Stock Market：Black Swans, Animal Spirits and Scapegoats

'Animal spirits' is a term that describes the instincts and emotions driving human behaviour in economic settings. In recent years, this concept has been discussed in relation to the emerging field of narrative economics. When unscheduled events hit the stock market, from corporate scandals and technological breakthroughs to recessions and pandemics, relationships driving returns change in unforeseeable ways. To deal with uncertainty, investors engage in narratives which simplify the complexity of real-time, non-routine change. This book assesses the novelty-narrative hypothesis for the U.S. stock market by conducting a comprehensive investigation of unscheduled events using big data textual analysis of financial news. This important contribution to the field of narrative economics finds that major macro events and associated narratives spill over into the churning stream of corporate novelty and sub-narratives, spawning different forms of unforeseeable stock market instability.