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The influence and predictive powers of mixed-frequency individual stock sentiment on stock returns

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  • Wang, Ruina
  • Li, Jinfang

Abstract

In this article, we construct mixed-frequency individual stock sentiment using MIDAS model. We first investigate the influence power of mixed-frequency individual stock sentiment on excess returns. The results indicate that the higher the frequency of individual stock sentiment is, the better it explains the variation of excess returns, that mixed-frequency individual stock sentiment, especially mixed high-frequency sentiment, exerts greater influence on excess returns than the same frequency one and that the mixed-frequency sentiment has a stronger explanatory power to the variation of excess returns than size factor, book-to-market factor, profitability factor and investment factor do. Then, we study the predictive content of mixed-frequency individual stock sentiment. The results show that the higher the frequency of individual stock sentiment is, the better the forecast performs. Moreover, by comparing the corresponding statistics in influence and predictive power models, we find that the influence power of mixed-frequency individual stock sentiment is more significant than its predictive power.

Suggested Citation

  • Wang, Ruina & Li, Jinfang, 2021. "The influence and predictive powers of mixed-frequency individual stock sentiment on stock returns," The North American Journal of Economics and Finance, Elsevier, vol. 58(C).
    • Handle: RePEc:eee:ecofin:v:58:y:2021:i:c:s1062940821001388
    DOI: 10.1016/j.najef.2021.101522
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    Cited by:

    1. Li, Jinfang, 2022. "The sentiment pricing dynamics with short-term and long-term learning," The North American Journal of Economics and Finance, Elsevier, vol. 63(C).

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    More about this item

    Keywords

    Individual stock investor sentiment; Mixed-frequency; Influence power; Forecasting;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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