Explaining bank stock performance with crisis sentiment

Felix Irresberger, Janina Mühlnickel and Gregor N.F. Weiß

Journal of Banking & Finance, 2015, vol. 59, issue C, 311-329

Abstract: Using search volume data on crisis-related queries from Google Trends, we estimate three different measures of market-level and individual crisis sentiment. We find that the stock performance of international banks during the period Q1 2004 to Q4 2012 was significantly driven by investors’ irrational market-wide crisis sentiment. Our empirical analysis shows that irrational market-wide crisis sentiment leads investors to devalue bank stocks irrespective of idiosyncratic or macroeconomic fundamentals. Comparing this finding with results for a sample of non-financial companies, we find evidence in support of the notion that the effect of crisis sentiment on stock returns is strongest in the absence of implicit bailout guarantees.

Keywords: Financial crisis; Bank performance; Investor sentiment (search for similar items in EconPapers)
JEL-codes: G01 G02 G21 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (29)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:59:y:2015:i:c:p:311-329

DOI: 10.1016/j.jbankfin.2015.06.001

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