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Internet finance investor sentiment and return comovement

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  • Chen, Rongda
  • Yu, Jingjing
  • Jin, Chenglu
  • Bao, Weiwei

Abstract

Since more and more investors are affected by the Internet finance, this paper focuses on examining whether the systematic trading among investors would lead to stock return comovements beyond the usual risk factors. Internet finance investor sentiment index (IFIS) measures the sentiment related to Internet finance investors' behaviors, which is found to be a systematic factor of stock market returns. To clarify the influence mechanism of IFIS, two groups of portfolios are constructed. First, stocks are sorted into three portfolios according to their degrees of relevance to Internet financial products. IFIS has more significant impact on stocks of firms closely linked to Internet financial products. Second, the role of IFIS on return comovements is further examined using size portfolios. Interestingly, IFIS has significant incremental explanatory power, beyond Fama and French (2015) five factors, on return comovements for stocks with larger market capitalization. This phenomenon is contradictory to the findings by using existing stock investor sentiment in the literature. Our findings have strong implications for research on Internet finance and stock return comovements.

Suggested Citation

  • Chen, Rongda & Yu, Jingjing & Jin, Chenglu & Bao, Weiwei, 2019. "Internet finance investor sentiment and return comovement," Pacific-Basin Finance Journal, Elsevier, vol. 56(C), pages 151-161.
  • Handle: RePEc:eee:pacfin:v:56:y:2019:i:c:p:151-161
    DOI: 10.1016/j.pacfin.2019.05.010
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    Cited by:

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    2. Yao, Yinhong & Li, Jianping & Sun, Xiaolei, 2021. "Measuring the risk of Chinese Fintech industry: evidence from the stock index," Finance Research Letters, Elsevier, vol. 39(C).
    3. Isaac Appiah-Otoo & Na Song, 2021. "The Impact of Fintech on Poverty Reduction: Evidence from China," Sustainability, MDPI, vol. 13(9), pages 1-13, May.
    4. Chen, Rongda & Wang, Shengnan & Jin, Chenglu & Yu, Jingjing & Zhang, Xinyu & Zhang, Shuonan, 2023. "Comovements between multidimensional investor sentiment and returns on internet financial products," International Review of Financial Analysis, Elsevier, vol. 85(C).
    5. Hilary Tinotenda Muguto & Lorraine Rupande & Paul-Francois Muzindutsi, 2019. "Investor sentiment and foreign financial flows: Evidence from South Africa," Zbornik radova Ekonomskog fakulteta u Rijeci/Proceedings of Rijeka Faculty of Economics, University of Rijeka, Faculty of Economics and Business, vol. 37(2), pages 473-498.
    6. Na Song & Isaac Appiah-Otoo, 2022. "The Impact of Fintech on Economic Growth: Evidence from China," Sustainability, MDPI, vol. 14(10), pages 1-17, May.
    7. Chen, Rongda & Wei, Bo & Jin, Chenglu & Liu, Jia, 2021. "Returns and volatilities of energy futures markets: Roles of speculative and hedging sentiments," International Review of Financial Analysis, Elsevier, vol. 76(C).
    8. Zhennan Wu, 2022. "Using Machine Learning Approach to Evaluate the Excessive Financialization Risks of Trading Enterprises," Computational Economics, Springer;Society for Computational Economics, vol. 59(4), pages 1607-1625, April.
    9. Yang Fuming & WeiLun Huang & Liu Xiaojing, 2022. "Micro- and small-sized enterprises’ willingness to borrow via internet financial services during coronavirus disease 2019," International Entrepreneurship and Management Journal, Springer, vol. 18(1), pages 191-216, March.
    10. Chen, Rongda & Qian, Qian & Jin, Chenglu & Xu, Min & Song, Qiping, 2020. "Investor attention on internet financial markets," Finance Research Letters, Elsevier, vol. 36(C).
    11. Chen, Rongda & Bao, Weiwei & Jin, Chenglu, 2021. "Investor sentiment and predictability for volatility on energy futures Markets: Evidence from China," International Review of Economics & Finance, Elsevier, vol. 75(C), pages 112-129.

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