The association between GDP growth forecasts and past information flows is evaluated for a sample of 49 countries during the period 1990–2014. The analysis exploits an extensive collection of forecasts available through IMF's historical database. The empirical results indicate a robust association between information arrival and subsequent mean forecast errors (the average difference between forecast and realization). Consistent with the overreaction hypothesis, more positive information is followed by higher mean forecast errors. The association is documented for multiple metrics of past information flows: growth performance, a novel metric of press sentiment, and lagged forecast errors. When advanced and emerging economies are differentiated, the regularity is detected for both groups but is stronger in the case of emerging economies.
This study evaluates the performance of stock market indices after times of extreme opinions. The underlying conjecture is that extreme opinions are associated to overreactions in the perception of wealth. The analysis covers 34 countries from 1988 through 2013. In a novel approach, views regarding economic performance are approximated using content in the global economic press. Consistent with the overreaction conjecture, stock market indices are shown to under-perform following extreme optimistic views and over-perform after pessimistic views. A long-short contrarian portfolio earns 11% annually over the next five years. This persistent and predictable difference in returns cannot be explained by risk considerations and cannot be replicated using alternative strategies based on past returns or past economic growth.
This study analyzes mobility patterns during the COVID-19 pandemic for eight large Latin American cities. Indicators of mobility by socioeconomic status (SES) are generated by combining georeferenced mobile phone information with granular census data. Before the pandemic, a strong positive association between SES and mobility is documented. With the arrival of the pandemic, in most cases, a negative association between mobility and SES emerges. This new pattern is explained by a notably stronger reduction in mobility by high-SES individuals. A comparison of mobility for SES decile 1 vs decile 10 shows that, on average, the reduction is 75% larger in the case of decile 10. According to estimated lasso models, an indicator of government restrictions provides a parsimonious description of these heterogeneous responses. These estimations point to noticeable similarities in the patterns observed across cities. We also explore how the median distance traveled changed for individuals that travel at least 1 km (the intensive margin). We find that the reduction in mobility in this indicator was larger for high-SES individuals compared to low-SES individuals in six out of eight cities analyzed. The evidence is consistent with asymmetries in the feasibility of working from home and in the ability to smooth consumption under temporary income shocks.
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