Causal Narratives

Category: Finance Seminar
When: 21 November 2023
, 12:00
 - 13:15
Where: Room Deutsche Bank, HoF E.01 or via Zoom

Abstract: We study causal narratives – narratives which describe a (potentially incorrect) causal relationship between variables. In a series of controlled experiments across a range of data-generating processes, we show that exogenously generated causal narratives manipulate the beliefs and actions of subjects in ways generally consistent with theory, but with important exceptions, including when subjects face multiple narratives that give different recommendations. To understand the generation and social transmission of narratives, we show that causal narratives arise endogenously when subjects who observe a dataset provide advice to future subjects. Homegrown causal narratives are perceived to be helpful, but mislead both the sender and receiver.