Social Media Emotions and Market Behavior

Domonkos F. Vamossy

Papers from arXiv.org

Abstract: I explore the relationship between investor emotions expressed on social media and asset prices. The field has seen a proliferation of models aimed at extracting firm-level sentiment from social media data, though the behavior of these models often remains uncertain. Against this backdrop, my study employs EmTract, an open-source emotion model, to test whether the emotional responses identified on social media platforms align with expectations derived from controlled laboratory settings. This step is crucial in validating the reliability of digital platforms in reflecting genuine investor sentiment. My findings reveal that firm-specific investor emotions behave similarly to lab experiments and can forecast daily asset price movements. These impacts are larger when liquidity is lower or short interest is higher. My findings on the persistent influence of sadness on subsequent returns, along with the insignificance of the one-dimensional valence metric, underscores the importance of dissecting emotional states. This approach allows for a deeper and more accurate understanding of the intricate ways in which investor sentiments drive market movements.

Date: 2024-04
New Economics Papers: this item is included in nep-big, nep-exp and nep-pay
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://arxiv.org/pdf/2404.03792 Latest version (application/pdf)

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: https://EconPapers.repec.org/RePEc:arx:papers:2404.03792

Access Statistics for this paper

More papers in Papers from arXiv.org
Bibliographic data for series maintained by arXiv administrators ().