The 265th Wenlan Financial Forum

Abstract:

We apply economic narratives to inflation forecasting using a large news corpus and machine learning algorithms. We  measure economic narratives quantitatively from the full text content of over 880,000 Wall Street Journal articles and articles represent them as interpretable news topics. The results indicate that narrative-based forecasts are more accurate than  the benchmarks both in-sample and out-of-sample,  which perform especially well during recession periods. Narrative-based forecasts perform better in the long-run  forecasting,  suggesting that narratives help to capture the slowly-varying trend inflation objectives. Information about inflation  expectations and prices of specific goods embedded in narratives contributes to its predictive power. Overall,  we provide a novel representation of economic narratives and highlight the important role of economic narratives in  inflation forecasting.

Speaker Introduction:

Fuwei Jiang, Professor, PhD supervisor of the Department of Financial Engineering, Central University of Finance and Economics, selected by the National Talent Program of the Ministry of Education. His research fields include asset pricing, behavioral finance, financial technology, etc. He has published more than 40 papers in top economic and financial journals such as the Journal of Financial Economics, Review of Financial Studies, Management Science, Management World, Journal of Management Science, Financial Research, and Quarterly Economics. His achievements have been rated as the Top 1% of ESI global most cited papers and most cited papers in RFS. It has been reprinted and applied by Harvard Business Review, Tsinghua Financial Review, etc., and won many academic awards such as the Excellent Paper Award of Financial Research, Best Paper Award of the Asian Finance Association, Best Paper Award of International Financial Management Association, etc. He is the Deputy Editor of Accounting and Finance of SSCI source journals, editorial board member of Annals of Economics and Finance, and reviewer of more than 30 Chinese and English academic journals such as Management Science.