Forecasting realised volatility from search volume and overnight sentiment: Evidence from China

Ping Wang, Wei Han, Chengcheng Huang and Duy Duong

Research in International Business and Finance, 2022, vol. 62, issue C

Abstract: From the perspective of investors' perception on financial market risk, we examine the performance of market search volume and market overnight sentiment in forecasting the realised volatility (RV) of the Shanghai SE Composite Index and 16 industry indexes in China. We find that market search volume has a significant positive impact on the future RV of all indexes, and market overnight sentiment also has a significantly positive coefficient for most indexes. The out-of-sample forecasting results show that the market search volume performs better than the market overnight sentiment. The predictive model based on these two sentiment-based variables has a better and more robust performance than competing models, and it performs well in predicting the three-month-ahead and six-month-ahead RVs. Our results indicate that market search volume and the market overnight sentiment have complementary market sentiment information.

Keywords: Realised volatility; Industry indexes; Market search volume; Market overnight sentiment (search for similar items in EconPapers)
JEL-codes: C58 G11 G12 G17 Q43 Q47 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:riibaf:v:62:y:2022:i:c:s0275531922001222

DOI: 10.1016/j.ribaf.2022.101734

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