Financial markets and the macro-economy

Researchers working in financial markets use methods from experimental economics and behavioural psychology to model the diffusion of information into financial market prices.

This includes research using experimental asset markets to understand the causes of increased trading volume of cross-listed stocks and how the distribution of information among traders influences information aggregation in financial markets. The influence of investor sentiment on stock markets returns using variety of novel measurements such as mood relating to cultural and sporting events, population well-being and health conditions, is aligned to the Institute for Sustainable Futures’ Creating Healthy Societies “challenge theme” of the Institute for Sustainable Futures, as does related work examining the impact of climactic variation on financial market returns. Other research includes the forecasting of financial market variables, credit spreads on sovereign bonds, currency market volatility, and assessing the impacts of quantitative easing.

Research in macroeconomics examines a variety of topics in macroeconomic policy and forecasting. Assessing alternative models for forecasting yield curves for UK government bonds and international sovereign bonds, are a feature. Fiscal policies in European countries and sustainability of debt financing are the focus of research, while faculty also examine the consequences for macroeconomic policy models of incorporating hyperbolic discounting. This work currently continues with application and extension into the labour market. Monetary Policy, particular in the USA, and the impact of macroeconomic policy announcements on financial markets are also studied.

Research projects include

  • Macroeconomic nowcasting and how financial markets price information contained in the macroeconomic data
  • Modelling the on-going effects of QE in financial markets
  • Investor order choice and information dispersion
  • How behavioural biases affect individuals’ investment decisions and the dynamics of financial markets
  • The role that sentiment and physical well-being play in the investment decision making process
  • Non-linear Adjustments in the Current Account of the Euro-Periphery
  • Status, Identity and the Macroeconomy