Influence of Bloomberg’s Investor Sentiment Index: Evidence from European Union Financial Sector

Mariano González-Sánchez and M. Encina Morales de Vega
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Mariano González-Sánchez: Department of Business and Accounting, Universidad Nacional de Educación a Distancia (UNED), Paseo Senda del Rey, 11, 28040 Madrid, Spain
M. Encina Morales de Vega: Department of Business, Universidad San Pablo CEU, Julián Romea, 23, 28003 Madrid, Spain
Authors registered in the RePEc Author Service: Mariano Gonzalez Sanchez

Mathematics, 2021, vol. 9, issue 4, 1-21

Abstract: A part of the financial literature has attempted to explain idiosyncratic asset shocks through investor behavior in response to company news and events. As a result, there has been an increase in the development of different investor sentiment measurements. This paper analyses whether the Bloomberg investor sentiment index has a causal relationship with the abnormal returns and volume shocks of major European Union (EU) financial companies through a sample of 85 financial institutions over 4 years (2014–2018) on a daily basis. The i.i.d. shocks are obtained from a factorial asset pricing model and ARMA-GARCH-type process; then we checked whether there is both individual and joint causality between the standardized residuals. The results show that the explanatory capacity of the shocks of the firm Bloomberg sentiment index is low, although there is empirical evidence that the effects correspond more to the situation of the financial subsector (banks, real estate, financial services and insurance) than to the company itself, with which we conclude that the sentiment index analyzed reflects a sectorial effect more than individual one.

Keywords: investor sentiment; idiosyncratic shocks; financial institutions; market risk (search for similar items in EconPapers)
JEL-codes: C (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:gam:jmathe:v:9:y:2021:i:4:p:297-:d:492190

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