The effect of online environmental news on green industry stocks: The mediating role of investor sentiment

Abstract

In the digital era, most investors acquire information and exert their voices on the Internet; however, how environmental news influences the prices of green industry stocks and investor behavior is not clear. This study investigated the relationships among environmental news, investor sentiment, and green industry stock returns in China. Adopting a text analysis technique, we developed an index of media environmental attention with the news data from the CSMAR (China Stock Market & Accounting Research) database. Besides, we obtained online investor sentiment data based on the machine learning method. We also targeted the SSE Environmental Protection Industry Index and analyzed the relationships among media environmental attention, investor sentiment, and stock returns on two levels. The first was on the aggregate-level, using return information from the SSE Environmental Protection Industry Index and VAR model. The second was on the firm-level, by using stock returns from constituents of the SSE Environmental Protection Industry Index and panel data model. Empirical analysis showed that there was a significant negative relationship between media environmental attention and the stock returns of green industry companies. Environmental news had a significant impact on investor sentiment, which in turn played a mediating role in the process of affecting green industry stocks.