Can happiness predict future volatility in stock markets?

Muhammad Abubakr Naeem, Saqib Farid, Faruk Balli and Syed Jawad Hussain Shahzad

Research in International Business and Finance, 2020, vol. 54, issue C

Abstract: In this paper, we use the Twitter based happiness index as a proxy for investor sentiment in order to examine whether happiness influences future market volatility of country VIX indexes. Our sample includes the major stock markets of the USA, Canada, UK, Germany, France, Netherlands, Switzerland, Japan, China, Hong Kong, India, Brazil, South Korea, and South Africa. Using linear and nonlinear causality tests, we find that Twitter happiness significantly causes the future volatility of the sample countries. The robustness checks show no divergence from our primary findings and provide strong evidence of a nonlinear relationship between investor sentiment and future stock market volatility.

Keywords: G12; G14 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (14)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:riibaf:v:54:y:2020:i:c:s0275531919312292

DOI: 10.1016/j.ribaf.2020.101298

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