IDEAS home Printed from https://ideas.repec.org/a/gam/jjrfmx/v18y2024i1p2-d1551910.html
   My bibliography  Save this article

The Impact of Sentiment on Realized Higher-Order Moments in the S&P 500: Evidence from the Fear and Greed Index

Author

Listed:
  • Richard Mawulawoe Ahadzie

    (Tasmanian School of Business and Economics, University of Tasmania, Private Bag 84, Hobart, TAS 7001, Australia)

  • Peterson Owusu Junior

    (School of Construction Economics & Management, Faculty of Engineering & the Built Environment, University of the Witwatersrand, Johannesburg 2000, South Africa)

  • John Kingsley Woode

    (Department of Finance, School of Business, University of Cape Coast, Cape Coast, Ghana)

Abstract

This study empirically investigates the relationship between realized higher-order moments and the Fear and Greed Index as a measure of sentiments. We estimate daily realized moments using 5 min return data of the S&P 500 index from 3 January 2011 to 18 September 2020. We find that the Fear and Greed Index significantly impacts realized volatility during periods of extreme fear. Additionally, various sentiment indicators influence realized skewness and realized kurtosis. The VIX index significantly reduces realized skewness across all sentiment levels. Bearish and bullish sentiments have a significant negative relationship with negative realized skewness during periods of extreme fear and extreme greed. However, the Fear and Greed Index and bearish and bullish sentiments have a significant positive relationship with positive realized skewness. During extreme fear, the Fear and Greed Index and bearish and bullish sentiments have a significant negative relationship with realized kurtosis. These results remain consistent when considering the non-linear characteristics of the Fear and Greed Index during periods of extreme fear and extreme greed. These findings highlight the relevance of understanding sentiment in financial risk management and its significant relationship with the asymmetric and extremity characteristics of asset returns.

Suggested Citation

  • Richard Mawulawoe Ahadzie & Peterson Owusu Junior & John Kingsley Woode, 2024. "The Impact of Sentiment on Realized Higher-Order Moments in the S&P 500: Evidence from the Fear and Greed Index," JRFM, MDPI, vol. 18(1), pages 1-34, December.
    • Handle: RePEc:gam:jjrfmx:v:18:y:2024:i:1:p:2-:d:1551910
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/1911-8074/18/1/2/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/1911-8074/18/1/2/
    Download Restriction: no
    ---><---

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gam:jjrfmx:v:18:y:2024:i:1:p:2-:d:1551910. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.