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Stock Returns and Investor Sentiment: Textual Analysis and Social Media

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  • Zachary McGurk

    (Canisus College)

  • Adam Nowak

    (West Virginia University)

  • Joshua C. Hall

    (West Virginia University)

Abstract

The behavioral finance literature has found that investor sentiment has predictive ability for equity returns. This differs from standard finance theory, which provides no role for investor sentiment. We examine the relationship between investor sentiment and stock returns by employing textual analysis on social media posts. We find that our investor sentiment measure has a positive and significant effect on abnormal stock returns. These findings are consistent across a number of different models and specifications, providing further evidence against non-behavioral theories.

Suggested Citation

  • Zachary McGurk & Adam Nowak & Joshua C. Hall, 2019. "Stock Returns and Investor Sentiment: Textual Analysis and Social Media," Working Papers 19-03, Department of Economics, West Virginia University.
    • Handle: RePEc:wvu:wpaper:19-03
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    File URL: https://researchrepository.wvu.edu/cgi/viewcontent.cgi?article=1034&context=econ_working-papers
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    More about this item

    Keywords

    Investor sentiment; supervised learning; stock returns; social media; sufficient reduction; predictive regression;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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