Mood, firm behavior, and aggregate economic outcomes

Research output: Contribution to journalArticle

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.

Original languageEnglish (US)
JournalJournal of Financial Economics
DOIs
StateAccepted/In press - Jan 1 2018

Fingerprint

Mood
Economics
Firm behavior
Managers
Hiring decisions
Macroeconomic fluctuations
Macroeconomy
New business
Investment decision
Managerial decisions
Economic uncertainty
Small business
Job creation

Keywords

  • Cloud cover
  • Firm investment behavior
  • Managerial optimism
  • Mood
  • Small business managers
  • State-level Business cycles

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics
  • Strategy and Management

Cite this

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title = "Mood, firm behavior, and aggregate economic outcomes",
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.",
keywords = "Cloud cover, Firm investment behavior, Managerial optimism, Mood, Small business managers, State-level Business cycles",
author = "Vidhi Chhaochharia and Dasol Kim and Korniotis, {George M.} and Alok Kumar",
year = "2018",
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AU - Chhaochharia, Vidhi

AU - Kim, Dasol

AU - Korniotis, George M.

AU - Kumar, Alok

PY - 2018/1/1

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N2 - 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.

AB - 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.

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KW - Firm investment behavior

KW - Managerial optimism

KW - Mood

KW - Small business managers

KW - State-level Business cycles

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