Economics at your fingertips  

Intraday online investor sentiment and return patterns in the U.S. stock market

Thomas Renault

Journal of Banking & Finance, 2017, vol. 84, issue C, 25-40

Abstract: We implement a novel approach to derive investor sentiment from messages posted on social media before we explore the relation between online investor sentiment and intraday stock returns. Using an extensive dataset of messages posted on the microblogging platform StockTwits, we construct a lexicon of words used by online investors when they share opinions and ideas about the bullishness or the bearishness of the stock market. We demonstrate that a transparent and replicable approach significantly outperforms standard dictionary-based methods used in the literature while remaining competitive with more complex machine learning algorithms. Aggregating individual message sentiment at half-hour intervals, we provide empirical evidence that online investor sentiment helps forecast intraday stock index returns. After controlling for past market returns, we find that the first half-hour change in investor sentiment predicts the last half-hour S&P 500 index ETF return. Examining users’ self-reported investment approach, holding period and experience level, we find that the intraday sentiment effect is driven by the shift in the sentiment of novice traders. Overall, our results provide direct empirical evidence of sentiment-driven noise trading at the intraday level.

Keywords: Asset pricing; Investor sentiment; Intraday return predictability; Textual analysis; Machine learning; Social media (search for similar items in EconPapers)
JEL-codes: G02 G12 G14 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3) Track citations by RSS feed

Downloads: (external link)
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Access Statistics for this article

Journal of Banking & Finance is currently edited by Ike Mathur

More articles in Journal of Banking & Finance from Elsevier
Bibliographic data for series maintained by Dana Niculescu ().

Page updated 2019-03-31
Handle: RePEc:eee:jbfina:v:84:y:2017:i:c:p:25-40