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Investor climate sentiment and financial markets

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  • Santi, Caterina

Abstract

We propose to measure investor climate sentiment by performing sentiment analysis on StockTwits posts on climate change and global warming. In financial markets, stocks of emission (carbon-intensive) firms underperform clean (low-emission) stocks when investor climate sentiment is more positive. We document investors overreaction to climate change risk and reversal in longer horizons. Salient but uninformative climate change events, such as the release of a report on climate change and abnormal weather events, facilitate the investor learning process and correction of the mispricing.

Suggested Citation

  • Santi, Caterina, 2023. "Investor climate sentiment and financial markets," International Review of Financial Analysis, Elsevier, vol. 86(C).
    • Handle: RePEc:eee:finana:v:86:y:2023:i:c:s1057521923000066
    DOI: 10.1016/j.irfa.2023.102490
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    Cited by:

    1. Foglia, Matteo & Miglietta, Federica, 2024. "Does every cloud (bubble) have a silver lining? An investigation of ESG financial markets," Journal of Behavioral and Experimental Finance, Elsevier, vol. 42(C).
    2. Nuno Cassola & Claudio Morana & Elisa Ossola, 2023. "Green risk in Europe," Working Papers 526, University of Milano-Bicocca, Department of Economics.
    3. Tang, Xiaobo & Yao, Xingyuan & Dai, Ruyi & Wang, Qian, 2024. "Does green matter for crowdfunding? International evidence," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 92(C).
    4. Guo, Kun & Li, Yichong & Zhang, Yunhan & Chen, Yingtong & Ma, Yanran, 2024. "Cross-country risk spillovers of ESG stock indices: Dynamic patterns and the role of climate transition risks," International Review of Financial Analysis, Elsevier, vol. 95(PB).
    5. Huang, Leping & Zhang, Kuo & Wang, Jingxin & Zhu, Yingfu, 2023. "Examining the interplay of green bonds and fossil fuel markets: The influence of investor sentiments," Resources Policy, Elsevier, vol. 86(PA).
    6. Pham, Linh & Kamal, Javed Bin, 2024. "Blessings or curse: How do media climate change concerns affect commodity tail risk spillovers?," Journal of Commodity Markets, Elsevier, vol. 34(C).
    7. Joanna Próchniak & Renata Płoska & Anna Zamojska & Błażej Lepczyński & Giuseppe T. Cirella, 2023. "Maturity Analysis of Stock Exchanges in Africa: Prepandemic Sustainability Perspective," Sustainability, MDPI, vol. 15(8), pages 1-18, April.
    8. Sun, Yuan & Sun, Xiaowei & Wang, Zehao, 2024. "Climate risk exposure and geographical allocation of business activities: Evidence from Chinese listed companies," Finance Research Letters, Elsevier, vol. 59(C).
    9. Benlemlih, Mohammed & El Ouadghiri, Imane & Peillex, Jonathan & Platania, Federico & Toscano Hernandez, Celina, 2024. "Low-carbon movement and stock market uncertainty: Insights from international comparisons between fossil fuel companies," Energy Economics, Elsevier, vol. 136(C).

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    More about this item

    Keywords

    Climate change; Sentiment; Asset pricing; Sustainable investing; Textual analysis;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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