Stock returns and investor sentiment: textual analysis and social media

Abstract

The behavioral finance literature has found that investor sentiment has predictive ability for equity returns. This differs from standard finance theory, which provides no role for investor sentiment. We examine the relationship between investor sentiment and stock returns by employing textual analysis on social media posts. We find that our investor sentiment measure has a positive and significant effect on abnormal stock returns. These findings are consistent across a number of different models and specifications, providing further evidence against non-behavioral theories. JEL-Classification: G12, G13, G14

COVID-Induced Investor Sentiments and Market Reaction under Extreme Meteorological Conditions: Evidence from Clean Energy Sector of Asia-Pacific

“…Contrary to the conventional financial theory (e.g. efficient market hypothesis), our results are consistent with the behavioral finance perspective that there is a significant role of investor sentiment in the variation of equity returns (McGurk, Nowak, & Hall, 2020 0.883 0.835 0.950 0.917 Note: Investor sentiments is the dependent variable. Values in parenthesis are the robust standard errors.…”

Social Media Users’ Opinions on Remote Work during the COVID-19 Pandemic. Thematic and Sentiment Analysis

“…Social media analytics are classified as Business Intelligence & Analytics 2.0, which includes information retrieval and extraction as well as opinion mining, used in this paper to extract valuable information from Twitter (Chen et al, 2012). Typically, social media analytics can be used in business to measure brand personality, e.g., if the brand is young or old (Hu et al, 2019), to deepen the understanding of technological discontinuities and changes (Bullini Orlandi et al, 2020), to facilitate business to business sustainability (Sivarajah et al, 2020) or even the relationship between investor sentiment and stock returns (McGurk et al, 2020). An overview of Big Data analytics in social media is presented in Figure 1.…”

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