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What’s Trending? Stock-Level Investor Sentiment and Returns

Author

Listed:
  • Karolina Krystyniak

    (Faculty of Business and IT, Ontario Tech University, Oshawa, ON L1G 0C5, Canada)

  • Hongqi Liu

    (Shenzhen Finance Institute and School of Management and Economics, The Chinese University of Hong Kong, Shenzhen 518172, China)

  • Huajing Hu

    (Robert B. Willumstad School of Business, Adelphi University, Garden City, NY 11530, USA)

Abstract

We study a direct, firm-level measure of investor sentiment derived from social media (BTSS sentiment). While related to firm fundamentals, BTSS sentiment contains a substantial non-fundamental component. We decompose sentiment into fundamental and pure sentiment and show that return predictability and reversal are primarily driven by the latter. Sentiment is persistent and systematic in the short term. High sentiment predicts elevated concurrent returns and subsequent reversal within a year. The effect is strongest in hard-to-value stocks, such as small and young firms, where limits to arbitrage are more binding.

Suggested Citation

  • Karolina Krystyniak & Hongqi Liu & Huajing Hu, 2025. "What’s Trending? Stock-Level Investor Sentiment and Returns," IJFS, MDPI, vol. 13(3), pages 1-27, August.
    • Handle: RePEc:gam:jijfss:v:13:y:2025:i:3:p:158-:d:1736668
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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

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