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Internet search-based investor sentiment and value premium

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  • Klemola, Antti

Abstract

We study how unexpected change in Internet search-based investor sentiment affects subsequent value premium in the U.S. stock market. For the investor sentiment, we use a sentiment that is based on individual investors’ Internet search activity. We argue that stocks that are considered to be more sensitive to fluctuations in investor sentiment, like financially distressed (proxied by high book-to-market ratio) stocks, should also be more affected by unexpected changes in the sentiment. We find that an unexpected increase in optimism (pessimism) in the sentiment predicts positive (negative) subsequent value premium in the U.S stock market.

Suggested Citation

  • Klemola, Antti, 2020. "Internet search-based investor sentiment and value premium," Finance Research Letters, Elsevier, vol. 33(C).
    • Handle: RePEc:eee:finlet:v:33:y:2020:i:c:s1544612318309139
    DOI: 10.1016/j.frl.2019.06.022
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    Cited by:

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    2. Xu, Yongan & Liang, Chao & Li, Yan & Huynh, Toan L.D., 2022. "News sentiment and stock return: Evidence from managers’ news coverages," Finance Research Letters, Elsevier, vol. 48(C).
    3. Yuan Li & Yu Zhang, 2021. "Investor Sentiment, Idiosyncratic Risk, and Stock Price Premium: Evidence From Chinese Cross-Listed Companies," SAGE Open, , vol. 11(2), pages 21582440211, June.
    4. Fabozzi, Francesco A. & Nazemi, Abdolreza, 2023. "News-based sentiment and the value premium," Journal of International Money and Finance, Elsevier, vol. 136(C).

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    More about this item

    Keywords

    Search-based investor sentiment; Internet searches; Cross-sectional stock returns; Value premium;
    All these keywords.

    JEL classification:

    • G40 - Financial Economics - - Behavioral Finance - - - General

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