Investor sentiment and aggregate stock returns: the role of investor attention

This article develops a dynamic panel model to examine the association among coronavirus outbreak, investor attention, social isolation, investor sentiments and stock returns in the German Stock exchange. The results of the two-step GMM estimator show a significant effect of coronavirus disease 2019 (COVID-19) cases on the Frankfurt Stock Exchange after controlling for calendar anomalies, meteorological conditions, country-specific factors and oil returns. Results also show that a higher level of stock returns during social isolation (lockdown period) is explained by investor attention to buy underpriced stocks. Thus, temporary social isolation enhances an investor’s ability to make better investment decisions. Investor sentiment indicators (momentum and liquidity) are also positively associated with the stock return and partially mediate the COVID-returns link, but they have no direct effect on investor attention. The stock market attracts investor attention under good news shocks (recovered cases) when investor sentiments are optimistic. Our results are robust across the transparency level of firms and their size.

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Predictability of stock returns of financial companies and the role of investor sentiment: A multi-country analysis

Journal of Financial Stability ◽

10.1016/j.jfs.2015.09.004 ◽

2015 ◽

Vol 21 ◽

pp. 26-45 ◽

Cited By ~ 7

Author(s):

Anjeza Kadilli

Keyword(s):

Stock Returns ◽

Investor Sentiment ◽

Country Analysis

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Investor sentiment and government policy interventions: evidence from COVID-19 spread

Journal of Financial Economic Policy ◽

10.1108/jfep-02-2021-0038 ◽

2021 ◽

Vol ahead-of-print (ahead-of-print) ◽

Author(s):

Garima Goel ◽

Saumya Ranjan Dash

Keyword(s):

Stock Returns ◽

Government Policy ◽

Stock Return ◽

Investor Sentiment ◽

Role Of Government ◽

Content Type ◽

Policy Interventions ◽

The Impact ◽

Moderating Role

Purpose This paper aims to investigate the moderating role of government policy interventions amid the early spread of novel coronavirus (COVID-19) (January–May 2020) on the investor sentiment and stock returns relationship. Design/methodology/approach This paper uses panel data from a sample of 53 countries to examine the impact of investor sentiment, measured by the financial and economic attitudes revealed by the search (FEARS) index (Da et al., 2015) on the stock return. Findings The moderating role of government policy response indices with the FEARS index on the global stock returns is further explored. This paper finds that government policy responses have a moderating role in the sentiment and stock returns relationship. The effect holds true even when countries are split based on five classifications, i.e. cultural distance, health standard, government effectiveness, social well-being and financial development. The results are robust to an alternative measure of pandemic search intensity, quantile regression and two measures of stock market activity, i.e. conditional volatility and exchange traded fund returns. Research limitations/implications The sample period of this study encompasses the early spread phase (January–May 2020) of the novel COVID-19 spread. Originality/value This paper provides some early evidence on whether the government policy interventions are helpful to mitigate the impact of investor sentiment on the stock market. The paper also helps to shed better insights on the role of different country characteristics for the sentiment and stock return relationship.

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Measuring the effects of investor attention on China's stock returns

Data Science in Finance and Economics ◽

10.3934/dsfe.2021018 ◽

2021 ◽

Vol 1 (4) ◽

pp. 327-344

Author(s):

Yi Chen ◽

◽

Zhehao Huang ◽

Keyword(s):

Stock Returns ◽

Investor Attention ◽

Replacement Method ◽

High Quantiles ◽

Turbulent Times ◽

Market Search ◽

The Mean ◽

The Relationship ◽

Role Of Information

<abstract> <p>The increasing abundance of information leads to the scarcity of investor attention, which has become an important factor affecting the financial market. Search engines play the role of information retrieval and record the search behavior of investors, which is a direct and accurate measure of investor attention. This paper investigates the relationship between investor attention and China's stock market. Considering the relationship with stock returns as the mainline, we take the Baidu index as a substitute variable of investor attention to deeply study the correlation and the time-varying nature between investor attention and China's stock returns. To this end, we used quantile regression to examine the relationship over the period 2006–2021 to capture its evolution during calm and turbulent times. We thus investigated the effect of investor attention on the mean and other quantiles. Our findings show that the relationship between investor attention and China's stock returns exhibits time-variation as investor attention significantly impacts the dynamics of China's stock returns, but its sign and effect vary per quantile: investor attention is negatively correlated with stock returns at low quantiles, but it turns positive at high quantiles. In addition, to test the model's robustness, variable replacement method and model replacement method are used to conduct significance tests, respectively. The results are equally significant.</p> </abstract>

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Cannabis Stocks Returns: The Role of Liquidity and Investors’ Attention via Google Metrics

International Journal of Financial Studies ◽

10.3390/ijfs10010007 ◽

2022 ◽

Vol 10 (1) ◽

pp. 7

Author(s):

Stephanos Papadamou ◽

Alexandros Koulis ◽

Constantinos Kyriakopoulos ◽

Athanasios P. Fassas

Keyword(s):

Stock Returns ◽

Positive Relationship ◽

Impulse Response Function ◽

Return Volatility ◽

Investor Attention ◽

Vector Autoregressive ◽

Shock Transmission ◽

Return Dynamics ◽

The Empirical Analysis

This paper studies one of the most popular investment themes over recent years, investing in the cannabis industry. In particular, it investigates relationships between investor attention, as proxied by Google Trends, and stock market activities, i.e., return, volatility, and liquidity. To this end, in the empirical analysis we study how liquidity and investors’ attention affect the return dynamics of an investment in cannabis stocks by augmenting the three-factor Fama–French model. In addition, we use a vector autoregressive approach and the impulse response function to measure shock transmission between the variables under consideration. Our empirical findings show that there is a statistically positive relationship between cannabis stock returns and liquidity. We also find that increased investors’ attention results in higher returns.

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