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Investor Sentiment and Market Movements: A Granger Causality Perspective

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  • Tamoghna Mukherjee

Abstract

The stock market is heavily influenced by investor sentiment, which can drive buying or selling behavior. Sentiment analysis helps in gauging the overall sentiment of market participants towards a particular stock or the market as a whole. Positive sentiment often leads to increased buying activity and vice versa. Granger causality can be applied to ascertain whether changes in sentiment precede changes in stock prices.The study is focused on this aspect and tries to understand the relationship between close price index and sentiment score with the help of Granger causality inference. The study finds a positive response through hypothesis testing.

Suggested Citation

  • Tamoghna Mukherjee, 2025. "Investor Sentiment and Market Movements: A Granger Causality Perspective," Papers 2510.15915, arXiv.org.
    • Handle: RePEc:arx:papers:2510.15915
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    References listed on IDEAS

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    1. Hong, Yanran & Ma, Feng & Wang, Lu & Liang, Chao, 2022. "How does the COVID-19 outbreak affect the causality between gold and the stock market? New evidence from the extreme Granger causality test," Resources Policy, Elsevier, vol. 78(C).
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    3. Yu, Haixu & Liang, Chuanyu & Liu, Zhaohua & Wang, He, 2023. "News-based ESG sentiment and stock price crash risk," International Review of Financial Analysis, Elsevier, vol. 88(C).
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