Twitter investor sentiment and corporate earnings announcements

Abstract

We examine the impact of firm‐specific investor sentiment (FSIS) on stock returns for negative and positive earnings surprises. Using a measure constructed from firm‐specific tweets, we find that FSIS has a greater impact on stock returns for negative relative to positive earnings surprises. We further show that the impact of FSIS is greater for firms whose valuation is uncertain and difficult to arbitrage. Moreover, we provide evidence of return reversals over post‐announcement periods. Our results highlight the importance of FSIS around earnings announcements.

Information asymmetry, east–west cultural differences, and divergence in investor reactions

“…Second, our study contributes to an emerging strand of the literature focused on contemporary political events involving a nation's president or the executive branch of its government (see e.g., Acemoglu et al, 2018;Brown & Huang, 2020;Child et al, 2021;Wagner et al, 2018). 2 Third, our research relates to prior studies on the effects of cultural difference and investor sentiment on corporate finance (see, e.g., Altanlar et al, 2019;Dang et al, 2019;Knyazeva et al, 2018;Ucar, 2019;Cathcart et al, 2020;Cumming et al, 2022;Gao et al, 2021;Karampatsas et al, 2022).…”

A Study of Factors Influencing Investor Expectations in the Capital Market

“…Historically, major corporate announcements, such as acquisitions, mergers, or significant financial changes, have often led to dramatic stock price fluctuations. For example, research has analyzed how an earnings warning announcement by a large company significantly affects its stock price in a short period of time, which in turn affects the market performance of the entire industry [1]. In addition, announcements about management changes often have an immediate impact on investor confidence and future expectations of the company, which is reflected in the movement of stock prices and increased trading volume [1].…”

“…This paper focuses on three factors that primarily influence investor expectations: company announcements, market seasonality and environment, and social and corporate governance (ESG). Corporate announcements, such as earnings releases and major trades, are important sources of information for the market and directly affect investor behavior and expectations [1]. Seasonal factors, such as the holiday effect or the earnings cycle, have been shown to have a significant impact on stock returns and market volatility, revealing seasonal patterns in investor expectations [2].…”

“…First, the immediate impact of corporate announcements on investor expectations has been widely recognized as an important source of market information. However, how to quantify the impact of these announcements on long-term investment decisions and market trends, especially when interacting with other market dynamics, has yet to be thoroughly investigated [1]. Second, although the effects of market seasonality are widely observed, research on how seasonality interacts with other market factors, especially in influencing investors' long-term expectations, remains limited [2].…”

Investor sentiment and the risk–return relation: A two‐in‐one approach

“…We consider employing alternative sentiment proxies in this robustness test to ensure that our reported impact is due to investor sentiment rather than the selected sentiment proxies (Altanlar et al, 2019; Gao et al, 2021; Karampatsas et al, 2022). Here, we perform two different tests.…”