Investor emotions and earnings announcements

Domonkos F. Vamossy

Journal of Behavioral and Experimental Finance, 2021, vol. 30, issue C

Abstract: Armed with a decade of social media data, I explore the impact of investor emotions on earnings announcements. In particular, I test whether the emotional content of firm-specific messages posted on social media just prior to a firm’s earnings announcement predicts its earnings and announcement returns. I find that investors are typically excited about firms that end up exceeding expectations, yet their enthusiasm results in lower announcement returns. Specifically, a standard deviation increase in excitement is associated with an 7.8 basis points lower announcement return, which translates into an approximately −5.8% annualized loss. My findings confirm that emotions and market dynamics are closely related and highlight the importance of considering investor emotions when assessing a firm’s short-term value.

Keywords: Deep learning; Investor emotions; Capital markets (search for similar items in EconPapers)
JEL-codes: G41 L82 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:beexfi:v:30:y:2021:i:c:s2214635021000186

DOI: 10.1016/j.jbef.2021.100474

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