Research

Abstract: Do oil supply news shocks affect the U.S. economy differently at the zero lower bound? We provide evidence consistent with this hypothesis. Using various U.S. macroeconomic time series data from 1975, we find that the transmission of oil price shocks driven by changes in supply expectations is substantially dierent at the zero lower bound. These shocks tend to be contractionary when interest rates are higher, and expansionary when monetary policy is operating in the ZLB. Private business investment plays a key role in altering the transmission of oil supply news shocks around the ZLB. The results continue to hold even after controlling for a potentially confounding non-linearity associated with the U.S. shale oil boom. Our empirical investigation should improve our understanding of the role played by policy and structural factors in altering the transmission of oil shocks to the U.S. economy.

Abstract: This paper aims to investigate the nonlinear relationship between oil prices and stock returns around the zero lower bound. Using state-dependent local projections, we find that oil price shocks cause an increase in stock returns when the economy is operating in the zero lower bound. On the other hand, oil prices and stock returns mostly show a negative relationship when interest rates are higher. Our results are robust to the inclusion of variables that control for the state of the economy, as well as exogenous measures of oil price shocks derived following Kilian (2009) and Känzig (2021). This study, thus emphasizes the need for investors and policy-makers to consider asymmetries in the impact of oil price shocks across the zero lower bound when analyzing the aggregate stock market behavior.

Abstract: This paper investigates the link between social media sentiment and the stock market using more than two million tweets posted in 2017 that include the name or symbol of twenty-five companies listed in the S&P 100. We are unable to detect a link between the two variables when looking at 15-minute intervals. However, we find a two-way relationship when using hourly and daily intervals, as a higher proportion of negative tweets about a company posted within an hour/day leads to lower returns and a higher short volume for its stock (even after controlling for traditional-media news sentiment). On the other hand, a higher return for a stock in an hour/day leads to less negative sentiment within the next period. These results are robust to various specifications and alternative measures of sentiment. Our findings suggest that social media sentiment includes signals beyond those found in traditional media that can impact the stock market. However, these signals are only considered reliable when the sentiment persists over a long enough period.

Abstract: State-dependent local projection methods have become the state-of-the-art technique for investigating asymmetric and/or nonlinear responses to economic (and other) shocks. We apply this methodology to examine whether El Niño-Southern Oscillation (ENSO) has asymmetric impacts on U.S. food and agricultural stock prices. Using weekly data from 1990:1 to 2019:4, we find support for the hypothesis that food and agricultural stock prices respond asymmetrically to ENSO shocks. In particular, we provide evidence that El Niño shocks typically decrease or have no effects on U.S. food and agricultural stock prices, whereas La Niña shocks generally increase prices. We argue that this asymmetric response of stock prices to El Niño and La Niña shocks may in part be explained by the differential impact of these shocks on food and agricultural commodity prices. The analysis, thus, emphasizes the need to consider asymmetries in the impacts of ENSO, as failure to do so might result in misleading conclusions about the effect of ENSO on U.S. food and agricultural stock prices.