Do optimistic portfolios outperform pessimistic portfolios: Evidence from textual sentiment

Yudhvir Seetharam and Kingstone Nyakurukwa

Economics Letters, 2024, vol. 242, issue C

Abstract: We examine whether textual sentiment (from news and social media) explains the cross-section of stock returns. Sentiment scores are used to sort stocks into tercile portfolios daily. Various asset pricing models, including CAPM and Fama-French models, are used to assess the sentiment's impact on returns after accounting for traditional risk factors. Results show that portfolios with higher (optimistic) sentiment consistently yield better average returns across the two sentiment measures and the different asset pricing models.

Keywords: Asset pricing; Sentiment-augmented asset pricing model; Behavioural finance; Investor sentiment (search for similar items in EconPapers)
JEL-codes: G12 G40 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:242:y:2024:i:c:s0165176524003847

DOI: 10.1016/j.econlet.2024.111900

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