Investor sentiment and the dispersion of stock returns: evidence based on the social network of investors

Al-Nasseri, Alya, Menla Ali, Faek and Tucker, Allan (2021) Investor sentiment and the dispersion of stock returns: evidence based on the social network of investors. International Review of Financial Analysis, 78. a101910. ISSN 1057-5219

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Abstract

This paper extracts an investor sentiment indicator for the 30 DJIA stocks based on the textual classification of 289,024 online tweets posted on the so-called StockTwits, and examines its contemporaneous and predictability effects on the dispersion of stock returns using the quantile regression technique. We find that both contemporaneous and predictability effects of sentiment are heterogeneous throughout the return distribution. Specifically, sentiment is positively contemporaneously associated with stock returns at higher quantiles. However, it is a strong negative predictor of future returns at lower quantiles. Overall, our findings are broadly consistent with most behavioural theories and show that sentiment mainly affects the valuation of assets in extreme market conditions.

Item Type: Article
Schools and Departments: University of Sussex Business School > Accounting and Finance
SWORD Depositor: Mx Elements Account
Depositing User: Mx Elements Account
Date Deposited: 21 Sep 2021 06:38
Last Modified: 13 Oct 2021 10:45
URI: http://sro.sussex.ac.uk/id/eprint/101795

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