Social Media Sentiment and Market Behavior

with Ermanno Affuso, Empirical Economics, Volume 57 (1), 2019, 105-127, doi: 10.1007/s00181-018-1430-y

Abstract

This paper examines the impact of investor sentiment and geography on stock returns. We measure investor sentiment and location using direct measures derived from Twitter posts. We find Twitter sentiment is among important factors that can have an impact on stock returns. Negative tweets have a larger impact than positive tweets. The direct effect of sentiment on daily returns is an economically significant 0.036 and 0.078% for positive and negative sentiment, respectively. Our results support the Hirshleifer (J Finance 56(4):1533–1597, 2001) premise that both risk and misvaluation are important to asset pricing.

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