News sentiment indicators and the cross-section of stock returns in the European stock market

Luca Gambarelli and Silvia Muzzioli

International Review of Economics & Finance, 2025, vol. 101, issue C

Abstract: This paper investigates whether the Bloomberg investor sentiment index can provide valuable information for investors and fund managers for the purposes of stock picking and portfolio selection. The dataset consists of all the listed companies in the Euro area for the period from 2010 to 2021. By exploiting portfolio sorting strategies, the paper evaluates to what extent and for how long investor sentiment can affect stock returns. Moreover, it considers whether additional factors can affect the relationship between sentiment and returns, casting light on the asymmetric effect related to positive and negative news.

Keywords: Investor sentiment; Cross section; Portfolio strategies; Future returns; Stock size (search for similar items in EconPapers)
JEL-codes: G11 G12 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:101:y:2025:i:c:s1059056025003703

DOI: 10.1016/j.iref.2025.104207

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