War And Government Policy Fears Drive The Equity Risk Premium

War And Government Policy Fears Drive The Equity Risk Premium 

What drives the stock market? It’s a fundamental question that traders and investors have been asking for decades. Asaf Manela of Washington University in St. Louis and Alan Moreira of Yale University decided to analyze this question through the lens of the business press. In a forthcoming paper, News Implied Volatility and Disaster Concerns, they systematically analyze the information published in the press from 1890 to 2009 and find that concerns about war and government policy are important drivers of the time-series variation in the premium investors demand to hold stocks.

Naturally, drivers of the stock market have been studied and researched countless times. But Manela and Moreira took a different...