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Stock-specific sentiment and return predictability

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  • Guillaume Coqueret

Abstract

This paper quantifies the impact of stock-specific news sentiment on future financial returns. Daily predictive regressions yield significant t-statistics for 7% at most of our sample of more than 1000 large stocks listed in the USA. While a few assets do run through pockets of predictability, the evidence suggests that the feedback effect is stronger in the reverse direction: returns are more likely to drive future sentiment than the other way around.

Suggested Citation

  • Guillaume Coqueret, 2020. "Stock-specific sentiment and return predictability," Quantitative Finance, Taylor & Francis Journals, vol. 20(9), pages 1531-1551, September.
    • Handle: RePEc:taf:quantf:v:20:y:2020:i:9:p:1531-1551
    DOI: 10.1080/14697688.2020.1736314
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    Cited by:

    1. Anastasiou, Dimitris & Ballis, Antonis & Drakos, Konstantinos, 2022. "Constructing a positive sentiment index for COVID-19: Evidence from G20 stock markets," International Review of Financial Analysis, Elsevier, vol. 81(C).
    2. Karam KIM & Doojin RYU, 2020. "Predictive ability of investor sentiment for the stock market," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(4), pages 33-46, December.
    3. Seok, Sangik & Cho, Hoon & Ryu, Doojin, 2024. "Dual effects of investor sentiment and uncertainty in financial markets," The Quarterly Review of Economics and Finance, Elsevier, vol. 95(C), pages 300-315.
    4. Rick Steinert & Saskia Altmann, 2023. "Linking microblogging sentiments to stock price movement: An application of GPT-4," Papers 2308.16771, arXiv.org.
    5. Vu Le Tran & Guillaume Coqueret, 2023. "ESG news spillovers across the value chain," Post-Print hal-04325746, HAL.
    6. Qinkai Chen, 2021. "Stock Movement Prediction with Financial News using Contextualized Embedding from BERT," Papers 2107.08721, arXiv.org.
    7. Seok, Sang Ik & Cho, Hoon & Ryu, Doojin, 2021. "Stock Market’s responses to intraday investor sentiment," The North American Journal of Economics and Finance, Elsevier, vol. 58(C).

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