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Three types of fear play market uncertainty: evidence from bank loan

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  • Yin-Siang Huang
  • You-Xun Lu
  • Yi-Chang Chen

Abstract

This research investigates whether the market sentiment influences firm stock returns with bank loan announcements. We find that CBOE Volatility Index (VIX) is positively related to cumulative abnormal returns, confirming VIX reflects the effect of loan announcements on the financial market. Results show that Financial and Economic Attitudes Revealed by Search (FEARS25) index without predictive power. Instead of that, the daily change of searching VIX (SVIX) of individual investors significantly capture the negative abnormal return before the loan announcements and cease as loan announcements occur. Our findings support that not only professional investors but also individual investors search on Google consider bank loan announcement as good news for borrowers.

Suggested Citation

  • Yin-Siang Huang & You-Xun Lu & Yi-Chang Chen, 2021. "Three types of fear play market uncertainty: evidence from bank loan," Applied Economics Letters, Taylor & Francis Journals, vol. 28(1), pages 70-78, January.
    • Handle: RePEc:taf:apeclt:v:28:y:2021:i:1:p:70-78
    DOI: 10.1080/13504851.2020.1733468
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