The Relationship Between Stock Returns and Investor Sentiment: Evidence from Social Media

Zachary McGurk () and Adam Nowak
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Adam Nowak: West Virginia University, College of Business and Economics

No 14-38, Working Papers from Department of Economics, West Virginia University

Abstract: The recent behavioral finance literature has found investor sentiment having some predictive ability in equity returns. This differs from the standard finance theory provides no role for investor sentiment. We examine the relationship between investor sentiment and stock returns by employing textual analysis on social media posts. Overall we find that our investor sentiment measure has a positive and significant effect on stock returns. These finds are consistent across a number of different models and specifications, thus finding further evidence against the standard finance theory.

Keywords: Investor Sentiment; Stock Returns; Social Media; Predictive Regression (search for similar items in EconPapers)
JEL-codes: G12 G13 G14 (search for similar items in EconPapers)
Pages: 8 pages
Date: 2014-12
New Economics Papers: this item is included in nep-fmk
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Persistent link: https://EconPapers.repec.org/RePEc:wvu:wpaper:14-38

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