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Can overnight return really serve as a proxy for firm-specific investor sentiment? Cross-country evidence

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  • Xiong, Xiong
  • Meng, Yongqiang
  • Li, Xiao
  • Shen, Dehua

Abstract

This paper investigates the suitability of employing overnight return as the proxy for firm-specific investor sentiment in six G7 countries (excluding U.S.) and five Asia-Pacific countries (New Zealand, Singapore, Australia, China and India), by analyzing whether it processes certain characteristics expected of sentiment measurement, i.e., short-run persistence, whether the persistence is more pronounced for harder-to-value firms and long-run reversal. Overall, the empirical findings fail to support that overnight return is a satisfied proxy for firm-specific investor sentiment outside the U.S. stock market.

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  • Xiong, Xiong & Meng, Yongqiang & Li, Xiao & Shen, Dehua, 2020. "Can overnight return really serve as a proxy for firm-specific investor sentiment? Cross-country evidence," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 64(C).
    • Handle: RePEc:eee:intfin:v:64:y:2020:i:c:s1042443119304822
    DOI: 10.1016/j.intfin.2019.101173
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    Cited by:

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    2. Yongqiang Meng & Dehua Shen & Xiong Xiong & Jørgen Vitting Andersen, 2020. "A Socio-Finance Model: The Case of Bitcoin," Post-Print halshs-03048777, HAL.
    3. Baoqing Gan, 2020. "Does Social Media Sentiment Trump News?," PhD Thesis, Finance Discipline Group, UTS Business School, University of Technology, Sydney, number 5-2020, January-A.
    4. Kallinterakis, Vasileios & Karaa, Rabaa, 2023. "From dusk till dawn (and vice versa): Overnight-versus-daytime reversals and feedback trading," International Review of Financial Analysis, Elsevier, vol. 85(C).
    5. Li, Yan & Li, Weiping, 2021. "Firm-specific investor sentiment for the Chinese stock market," Economic Modelling, Elsevier, vol. 97(C), pages 231-246.
    6. Mariano González-Sánchez & M. Encina Morales de Vega, 2021. "Influence of Bloomberg’s Investor Sentiment Index: Evidence from European Union Financial Sector," Mathematics, MDPI, vol. 9(4), pages 1-21, February.
    7. Zhang, Zuochao & Shen, Dehua, 2024. "Firm-specific new media sentiment and price synchronicity," Research in International Business and Finance, Elsevier, vol. 69(C).
    8. Sakariyahu, Rilwan & Johan, Sofia & Lawal, Rodiat & Paterson, Audrey & Chatzivgeri, Eleni, 2023. "Dynamic connectedness between investors’ sentiment and asset prices: A comparison between major markets in Europe and USA," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 89(C).
    9. Chu, Xiaojun & Wan, Xinmin & Qiu, Jianying, 2023. "The relative importance of overnight sentiment versus trading-hour sentiment in volatility forecasting," Journal of Behavioral and Experimental Finance, Elsevier, vol. 39(C).

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    More about this item

    Keywords

    Overnight return; Firm-specific investor sentiment; Sentiment-driven mispricing; Cross-country stock markets;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets

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