Siganos, A. , Vagenas-Nanos, E. and Verwijmeren, P. (2017) Divergence of sentiment and stock market trading. Journal of Banking and Finance, 78, pp. 130-141. (doi: 10.1016/j.jbankfin.2017.02.005)
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Abstract
This paper introduces the concept of divergence of sentiment to the behavioral finance literature. We measure the distance between people with positive and negative sentiment on a daily basis for 20 countries by using data from status updates on Facebook. The prediction is that a higher divergence of sentiment leads to more diverging views on prospects and risks, and thus to more diverging views on the value of a stock. In line with this prediction, divergence of sentiment is positively related to trading volume. We further predict and find a positive relation between divergence of sentiment and stock price volatility. The observed relations are stronger when individual investors are more likely to trade. We compare the effect of our country-specific measures to a global measure of divergence of sentiment. We find that the separate effects of country-specific and global divergence measures depend on a country's level of market integration.
Item Type: | Articles |
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Status: | Published |
Refereed: | Yes |
Glasgow Author(s) Enlighten ID: | Vagenas-Nanos, Professor Evangelos and Verwijmeren, Professor Patrick and Siganos, Professor Antonios |
Authors: | Siganos, A., Vagenas-Nanos, E., and Verwijmeren, P. |
College/School: | College of Social Sciences > Adam Smith Business School > Accounting and Finance |
Journal Name: | Journal of Banking and Finance |
Publisher: | Elsevier Ltd. |
ISSN: | 0378-4266 |
ISSN (Online): | 1872-6372 |
Published Online: | 11 February 2017 |
Copyright Holders: | Copyright © 2017 Elsevier |
First Published: | First published in Journal of Banking and Finance 78:130-141 |
Publisher Policy: | Reproduced in accordance with the copyright policy of the publisher |
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