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Does social network sentiment influence the relationship between the S&P 500 and gold returns?

Author

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  • Piñeiro-Chousa, Juan
  • López-Cabarcos, M. Ángeles
  • Pérez-Pico, Ada María
  • Ribeiro-Navarrete, Belén

Abstract

This study explored the relationship between investor sentiment (extracted from the StockTwits social network), the S&P 500 Index and gold returns. We investigated bilateral causality between gold prices and S&P 500 prices, the power of investor sentiment and gold returns to predict S&P 500 returns, and the influence of gold returns on S&P 500 volatility. We also considered whether the influence of sentiment varies according to the user's degree of experience. We considered the sentiment of messages that mentioned the S&P 500 Index and that users posted between 2012 and 2016. Granger causality analysis, ARIMA models and GARCH models were used for predicting S&P 500 Index returns and S&P 500 volatility. We observed a causal relationship between gold price and the S&P 500 Index. Our results also suggest that sentiment and gold returns predict S&P 500 Index returns. Finally, we observed that gold returns influence S&P 500 volatility and that the sentiment of experienced users affects S&P 500 returns.

Suggested Citation

  • Piñeiro-Chousa, Juan & López-Cabarcos, M. Ángeles & Pérez-Pico, Ada María & Ribeiro-Navarrete, Belén, 2018. "Does social network sentiment influence the relationship between the S&P 500 and gold returns?," International Review of Financial Analysis, Elsevier, vol. 57(C), pages 57-64.
    • Handle: RePEc:eee:finana:v:57:y:2018:i:c:p:57-64
    DOI: 10.1016/j.irfa.2018.02.005
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    More about this item

    Keywords

    Social media sentiment; Gold; S&P 500; ARIMA; GARCH;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)

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