Impact of Sentiment Media on European Stock Markets: Influence of National Culture[Médias et sentiment sur les marchés actions européens : influence de la culture nationale]

This paper develops a new measure of investor sentiment in Europe using daily content from a Financial Times column. Consistent with the behavioral approach, we find that our investor sentiment measure impacts the returns of stocks hard to value and difficult to arbitrage. High pessimistic (optimistic) sentiment induces downward (upward) price pressure followed by a reversion of prices to fundamentals. Furthermore, we show that the culture influences the relationship between investor sentiment and stock returns. In particular, the impact of sentiment on stock returns is more pronounced in countries, which are culturally more prone to herd-like behavior and overreaction.