 Sentiment stocksHang Dong and Javier Gil-Bazo International Review of Financial Analysis, 2020, vol. 72, issue C Abstract: To study how investor sentiment at the firm level affects stock returns, we match more than 58 million social media messages in China with listed firms and construct a measure of individual stock sentiment based on the tone of those messages. We document that positive investor sentiment predicts higher stock risk-adjusted returns in the very short term followed by price reversals. This association between stock sentiment and stock returns is not explained by observable stock characteristics, unobservable time-invariant characteristics, market-wide sentiment, overreaction to news, or changing investor attention. Consistent with theories of investor sentiment, we find that the link between sentiment and stock returns is mainly driven by positive sentiment and non-professional investors. Finally, exploiting a unique feature of the Chinese stock market, we are able to isolate the causal effect of sentiment on stock returns from confounding factors. Keywords: Investor sentiment; Stock returns; Social media; Investor attention; News sentiment (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:72:y:2020:i:c:s1057521920302179 DOI: 10.1016/j.irfa.2020.101573 Access Statistics for this article International Review of Financial Analysis is currently edited by B.M. Lucey More articles in International Review of Financial Analysis from Elsevier |
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