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Mood, firm behavior, and aggregate economic outcomes

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Chhaochharia, Vidhi, Kim, Dasol, Korniotis, George and Kumar, Alok (2018) Mood, firm behavior, and aggregate economic outcomes. Journal of Financial Economics . doi:10.1016/j.jfineco.2018.10.010 (In Press)

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Official URL: https://doi.org/10.1016/j.jfineco.2018.10.010

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Abstract

This study examines whether mood affects the aggregate state-level macroeconomy through its impact on firm-level decisions. Using sky cloud cover as a proxy for mood, we show that mood affects the economic expectations of small business managers. After relatively sunnier periods, managers have more optimistic expectations, and the component of their expectations related to mood influences hiring and investment decisions. Consequently, mood affects state-level job creation and new business starts, especially during periods of greater economic uncertainty. These results suggest that mood-induced economic expectations influence firm-level managerial decisions and state-level macroeconomic fluctuations.

Item Type: Journal Article
Divisions: Faculty of Social Sciences > Warwick Business School
Journal or Publication Title: Journal of Financial Economics
Publisher: Elsevier Science BV
ISSN: 0304-405X
Official Date: 6 November 2018
Dates:
DateEvent
6 November 2018Available
19 August 2017Accepted
DOI: 10.1016/j.jfineco.2018.10.010
Status: Peer Reviewed
Publication Status: In Press
Access rights to Published version: Restricted or Subscription Access
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