Financial Returns, Sentiment and Market Volatility: a Dynamic Assessment

Giampiero Gallo (), C.Ongari and S. Borgioli

Working Paper CRENoS from Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia

Abstract: In 1936, John Maynard Keynes proposed that emotions and instincts are pivotal in decisionmaking, particularly for investors. Both positive and negative moods can influence judgments and decisions, extending to economic and financial choices. Intuitions, emotional states, and biases significantly shape how people think and act. Measuring mood or sentiment is challenging, but surveys and data collection methods, such as confidence indices and consensus forecasts, offer some solutions. Recently, the availability of web data, including search engine queries and social media activity, has provided high-frequency sentiment measures. For example, the Italian National Statistical Institute's Social Mood on Economy Index (SMEI) uses Twitter data to assess economic sentiment in Italy. The relationship between SMEI and financial market activity, specifically the FTSE MIB index and its volatility, is examined using a trivariate Vector Autoregressive model, taking into account the impact of the COVID-19 pandemic.

Keywords: VAR; sentiment analysis; granger causality; forecasting; Financial market (search for similar items in EconPapers)
Date: 2024
New Economics Papers: this item is included in nep-pke
References: Add references at CitEc
Citations:

Downloads: (external link)
https://crenos.unica.it/crenos/node/8854
https://crenos.unica.it/crenos/sites/default/files/wp-24-15.pdf (application/pdf)

Related works:
Working Paper: Financial returns, sentiment and market volatility. A dynamic assessment (2024)
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:cns:cnscwp:202415

Access Statistics for this paper

More papers in Working Paper CRENoS from Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia Contact information at EDIRC.
Bibliographic data for series maintained by CRENoS ().