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Greed and Fear: The Nature of Sentiment

Author

Listed:
  • Giovanni Barone-Adesi

    (Swiss Finance Institute)

  • Matteo Pisati

    (University of Lugano)

  • Carlo Sala

    (ESADE Business School and University of Lugano)

Abstract

Empirical indicators of sentiment are commonly employed in the economic literature while a precise understanding of what is sentiment is still missing. Exploring the links among the most popular proxies of sentiment, fear and uncertainty this paper aims to fi ll this gap. We show how fear and sentiment are specular in their predictive power in relation to the aggregate market and to cross-sectional returns. Finally, we document how sentiment and fear time cross-sectional returns: conditionally on a today's high (low) level of fear we observe a next month high (low) return per unit of risk. The opposite holds for sentiment.

Suggested Citation

  • Giovanni Barone-Adesi & Matteo Pisati & Carlo Sala, 2018. "Greed and Fear: The Nature of Sentiment," Swiss Finance Institute Research Paper Series 18-45, Swiss Finance Institute.
    • Handle: RePEc:chf:rpseri:rp1845
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    File URL: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3195733
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    Cited by:

    1. Chelo Vargas-Sierra & M. Ángeles Orts, 2023. "Sentiment and emotion in financial journalism: a corpus-based, cross-linguistic analysis of the effects of COVID," Palgrave Communications, Palgrave Macmillan, vol. 10(1), pages 1-17, December.
    2. Deimante Teresiene & Greta Keliuotyte-Staniuleniene & Yiyi Liao & Rasa Kanapickiene & Ruihui Pu & Siyan Hu & Xiao-Guang Yue, 2021. "The Impact of the COVID-19 Pandemic on Consumer and Business Confidence Indicators," JRFM, MDPI, vol. 14(4), pages 1-23, April.
    3. Jesús Tomás Monge Moreno & Manuel Monge, 2023. "Coronavirus, Vaccination and the Reaction of Consumer Sentiment in The United States: Time Trends and Persistence Analysis," Mathematics, MDPI, vol. 11(8), pages 1-8, April.
    4. Mora-Valencia, Andrés & Rodríguez-Raga, Santiago & Vanegas, Esteban, 2021. "Skew index: Descriptive analysis, predictive power, and short-term forecast," The North American Journal of Economics and Finance, Elsevier, vol. 56(C).

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