Role Of Sentiment Research Articles

Inflation Expectations in Central, Eastern and Southeastern Europe: The Role of Sentiment and Experiences

Inflation Expectations in Central, Eastern and Southeastern Europe: The Role of Sentiment and Experiences

Factor returns and FOMC announcements: The role of sentiment

We examine the dynamics of long-short factor returns on FOMC announcement days and the role of sentiment. We find that factor returns are negative on FOMC announcement days. Moreover, on these days returns are significantly lower following low sentiment periods. Hence, investor sentiment is a key driver of factor returns on FOMC days and this effect emanates mainly from the short portfolio leg of each factor.

The Role of Sentiment in Credit Markets

The Role of Sentiment in Credit Markets

Impactos dos sentimentos racionais e irracionais dos investidores no mercado brasileiro

Abstract This article aimed to determine how rational and irrational investor sentiments impact the return and volatility of the Brazilian market. The role of sentiment in financial markets is still a recent, controversial and limited subject, and this study explores this relationship in the Brazilian market. The evidence from this research adds to the limited number of studies on investor sentiment in emerging markets and extends the evidence already documented in Brazil. Our results are expected to have an impact on investors, policymakers and monetary authorities. Investors must be aware of economic fundamentals when formulating their investment strategies and also when choosing the stocks that will make up their portfolios. Policymakers and monetary authorities should take sentiment into account when formulating political, economic and monetary strategies, as economic changes can affect investor psychology and be reflected in their stock market trading. Consumer and business confidence indexes were used as proxies for investor sentiment and were regressed against a set of economic fundamentals to isolate their rational and irrational components. Then, autoregressive vector models were estimated and impulse response functions and variance decompositions were generated to verify the impact of sentiment on the return and volatility of the Ibovespa. There are three main results. First, investor sentiment impacts both returns and volatility in the Brazilian market. Second, economic fundamentals were important determinants of returns and volatility in the Brazilian market, indicating that fundamental trading induced by rational sentiment had a greater effect than trading induced by irrational sentiment. Third, in terms of magnitude, consumer-based sentiment had a greater impact than business-based sentiment.

Writing about a stressful experience improves semantic clustering of memory in men, not women.

Writing about negative experiences can produce multiple benefits, including improvements in mental and emotional health. However, writing about negative experiences potentially be detrimental, as reliving and reexperiencing a negative memory can be painful. Although the emotional effects of writing about negative experiences are well established, the cognitive effects are less heavily explored, and no work to date has examined how writing about a stressful experience might influence episodic memory. We addressed this issue in the present study (N=520) by having participants encode a list of 16 words that were organised around four semantic clusters, randomly assigning participants to write about an unresolved stressful experience (n=263) or the events of the previous day (n=257), and assessing their memory in a free recall task. Writing about a stressful experience did not influence overall memory performance; however, the stressful writing manipulation increased semantic clustering of information within memory for men, whereas the stressful writing manipulation did not influence semantic clustering of information within memory in women. Additionally, writing with more positive sentiment improved semantic clustering and reduced serial recall. These results provide evidence for unique sex differences in writing about stressful experiences and the role of sentiment in the effects of expressive writing.

Inflation Expectations in CESEE: The Role of Sentiment and Experiences

Inflation Expectations in CESEE: The Role of Sentiment and Experiences

Negativity spreads faster: A large-scale multilingual twitter analysis on the role of sentiment in political communication

Social media has become extremely influential when it comes to policy making in modern societies, especially in the western world, where platforms such as Twitter allow users to follow politicians, thus making citizens more involved in political discussion. In the same vein, politicians use Twitter to express their opinions, debate among others on current topics and promote their political agendas aiming to influence voter behaviour. In this paper, we attempt to analyse tweets of politicians from three European countries and explore the virality of their tweets. Previous studies have shown that tweets conveying negative sentiment are likely to be retweeted more frequently. By utilising state-of-the-art pre-trained language models, we performed sentiment analysis on hundreds of thousands of tweets collected from members of parliament in Greece, Spain and the United Kingdom, including devolved administrations. We achieved this by systematically exploring and analysing the differences between influential and less popular tweets. Our analysis indicates that politicians’ negatively charged tweets spread more widely, especially in more recent times, and highlights interesting differences between political parties as well as between politicians and the general population.

Time-frequency comovements between sovereign CDS and exchange rates: The role of sentiments

This study introduces various bivariate, multiple, and partial wavelet methods to explore the role of inclusive market sentiments in comovements between sovereign credit default swap (CDS) spreads and exchange rates from a time-frequency perspective. The empirical results show that the sovereign CDS spread and exchange rate nexus varies across countries and time-frequency domains. Further, the strong and positive comovements between sovereign CDS spreads and exchange rates are uncovered, concentered at medium- and long-term frequencies, especially in commodity-dependent countries. Among the various market sentiments, Volatility Index and Chicago Board Options Exchange Crude Oil Volatility are revealed as the most critical factors driving the comovements in commodity-dependent countries. The findings provide important recommendations for investors, regulatory authorities, and policymakers to understand the pivotal roles of market sentiments in inducing comovement between sovereign CDS spreads and exchange rates.

Behavioral heterogeneity and financial crisis: The role of sentiment

Recent empirical works have confirmed the importance of sentiment in asset pricing. In this paper, we propose that sentiment may not affect everyone in a homogeneous way. We construct a sentiment indicator taking into consideration behavioral heterogeneity of interacting investors. We find that sentiment contributes to several financial anomalies such as fat tails and volatility clustering of returns. More importantly, investor sentiment could be a significant source of financial market volatility. Our model with sentiment is able to replicate different types of crises, in which the crisis severity is enhanced with rise of sentiment sensitivity of chartist traders.

Can news-based economic sentiment predict bubbles in precious metal markets?

This study examines the role of market sentiment in predicting the price bubbles of four strategic metal commodities (gold, silver, palladium, and platinum) from January 1985 to August 2020. It is the first to investigate this topic using sentiment indices, including news-based economic and consumer-based sentiments developed using different methods. We observed the role of sentiment as a reliable indicator of future bubbles for some metal commodities and found that bubbles were regularly concomitant with bearish sentiments for gold and platinum. Moreover, gold and palladium were the only commodities that experienced a bubble during the COVID-19 pandemic. Overall, our findings suggest inclusion of sentiment to the model that predicts the price bubbles of precious metals.

Impact of sentiment and monetary policy on Mexican tourism stock returns: the domestic and US role

PurposeThis paper focuses on the role of sentiment and monetary policy (both domestic and the United States (US)) in explaining the changes in the Mexican tourism firms' stock returns for the period 1998M03–2019M12.Design/methodology/approachThe authors conducted the ordinary least square regression estimations using various models to investigate the impact of sentiment and monetary policy changes on tourism firms' stock returns. Furthermore, to provide a robust check, the authors run all regression models based on the capital asset pricing model by regressing the excess returns of tourism firms' stocks on all independent variables.FindingsEmpirical findings reveal that the changes in Mexican consumer sentiment have a stronger positive effect on tourism firms' stock returns than Mexican business sentiment changes. However, the US consumer and business sentiment are irrelevant to tourism firms' stock returns. Moreover, this study’s results indicate that changes in the US interest rates positively influence tourism firms' stock returns. This study’s findings show that as the monetary divergence between Mexico and the US (differential real interest rates) widens, the lower is the tourism firms' stock returns.Originality/valueThis study is the first to extend the prior studies by examining the effects of sentiment and monetary policy (both domestic and US role) on Mexican tourism stock return.

Which formula for corporate risk-taking around the world? Exploring happiness as the “black box”

PurposeThis paper examines how the degree of happiness affects corporate risk-taking and the moderating influence of family ownership of firms on this relationship.Design/methodology/approachThe authors use an international sample of 17,654 firm-year observations from 24 countries around the world from 2008 to 2016.FindingsUsing the happiness index from the World Happiness Report developed by the United Nations Sustainable Development Solutions Network, the authors show that a country's overall happiness is negatively correlated with risk-taking behavior by firms. The findings are robust to an alternative measure of risk-taking by firms. Further analyses document that the negative influence of happiness on firm risk-taking is more pronounced for family-owned firms.Practical implicationsThe paper is consistent with the notion that happier people are likely to be more risk-averse in making financial decisions, which, in turn, reduces corporate risk-taking.Originality/valueThis study contributes to the broad literature on the determinants of corporate risk-taking and the growing literature on the role of sentiment on investment decisions. The authors contribute to the current debate about family-owned firms by demonstrating that the presence of family trust strengthens the negative influence of happiness on corporate risk-taking, a topic that has been unexplored in previous studies.

A Sentiment-Aware Approach to Community Formation in Social Media

Participating in a community exemplifies the aspect of sharing, networking and interacting in a social media system. There has been extensive work on characterising on-line communities by their contents and tags using topic modelling tools. However, the role of sentiment and mood has not been studied. Arguably, mood is an integral feature of a text, and becomes more significant in the context of social media: two communities might discuss precisely the same topics, yet within an entirely different atmosphere. Such sentiment-related distinctions are important for many kinds of analysis and applications, such as community recommendation. We present a novel approach to identification of latent hyper-groups in social communities based on users’ sentiment. The results show that a sentiment-based approach can yield useful insights into community formation and meta-communities, having potential applications in, for example, mental health—by targeting support or surveillance to communities with negative mood—or in marketing—by targeting customer communities having the same sentiment on similar topics.

Candidates rather than context shape campaign sentiment in French Presidential Elections (1965\u20132017)

The manuscript explores whether and how the strategic context of elections and candidate attributes affect campaign sentiment. Studying five decades of French presidential elections, it provides the first longitudinal test of campaign tone outside the USA. Thereby, the paper examines concerns of an increase in negativity due to changes in electoral competition. It takes leverage from the electoral system, to study whether the strategic environment of elections (first vs. second rounds of elections) or candidate characteristics (ideology and outsider status) determine the use of positive and negative tone. To this end, the paper applies sentiment analysis to personal manifestos (professions de foi) issued by all candidates running in presidential elections (1965–2017) and validates the French Lexicoder Sentiment Dictionary for longitudinal studies of campaign tone. Results reject worries about an increase in negativity in French elections over time. Moreover, while context matters to some extent, candidate attributes are by far more important for explaining campaign sentiment in presidential races. The findings contribute to research on the role of sentiment in electoral competition and tackle broader issues related to the impact of positive and negative political communication for elections and democracies.

Social media, sentiment and public opinions: Evidence from #Brexit and #USElection

This paper studies information diffusion in social media and the potential role of bots in influencing public opinions. Using Twitter data on the 2016 E.U. Referendum (“Brexit”) and the 2016 U.S. Presidential Election, we find that diffusion of information on Twitter is largely complete within 1–2 h. Stronger diffusion between agents with similar beliefs is consistent with the “echo chambers” view of social media. Our results are consistent the notion that bots could have a tangible effect on the tweeting activity of humans and that the degree of bots’ influence depends on whether bots provide information consistent with humans’ priors. Overall, our results suggest that the aggressive use of Twitter bots, coupled with the fragmentation of social media and the role of sentiment, could enhance political polarization.

Effects of Conventional and Unconventional Monetary Policy Shocks on Housing Prices in the United States: The Role of Sentiment

In this paper, we use a Quantile Structural Vector Autoregressive (QSVAR) model, estimated over the quarterly period of 1975:Q3 to 2017:Q3, to analyze whether the impact of monetary policy shocks on growth rate of real house price in the United States is contingent on the initial state of housing market sentiment. We find that contractionary monetary policy reduces growth rate of real house price more strongly when the market is characterized by optimism rather than pessimism, with this effect being more pronounced under unconventional monetary policy decisions. Further robustness checks confirm our results. Our findings highlight the role in sentiments in driving the policy effectiveness and thus, have important implications for policy decisions.

Bricks and Antiquarianism: Masonry and Historical Method in the Historical Sciences

AbstractThe role of sentiment in narratives generated by antiquarians, dilettanti and geologists in late eighteenth‐century Britain features as a significant force in the development of the historical sciences. During the fieldwork for and subsequent publication of The Geography and Antiquities of Ithaca (1807), by Sir William Gell (1777‐1836), and A Description of the Principal Picturesque Beauties, Antiquities and Geological Phenomena of the Isle of Wight (1816), by his colleague Sir Henry Charles Englefield (c.1752‐1822), the role of association and sentiment makes visible the ruins of everyday‐type architectures and geological processes, and demonstrates tensions between human‐made and natural artefacts.

Forecasting with Economic News

The goal of this paper is to evaluate the informational content of sentiment extracted from news articles about the state of the economy. We propose a Fine-Grained Aspect-based Sentiment analysis that has two main characteristics: 1) we consider only the text in the article that is semantically dependent on a term of interest (aspect-based) and, 2) assign a sentiment score to each word based on a dictionary that we develop for applications in economics and finance (fine-grained). Our data set includes six large US newspapers, for a total of over 6.6 million articles and 4.2 billion words. Our findings suggest that several measures of economic sentiment track closely business cycle fluctuations and that they are relevant predictors for four major macroeconomic variables. The forecast accuracy increases significantly when economic sentiment is used in a time series model as these measures tend to proxy for the overall state of the economy. We also find that there are significant improvements in forecasting when sentiment is considered along with macroeconomic factors. In addition, we also consider the role of sentiment in the tails of the distribution and find that economic sentiment matters, in particular at low quantiles.

The role of sentiment in housing market with credit-led funding: the case of Turkey

This paper investigates the long run relationship among sentiment, which is defined as the aggregate investor attitude, housing credit and prices, and supply in Turkish housing market over the period of 2010:01 and 2018:06. The empirical results indicate that there is a long run relation among above stated variables. This study confirms the role of credit in explaining the increases in house prices. Importantly, this paper finds that the sentiment is significant in forecasting housing credit volume and supply on housing in the short run. The results also highlight the importance of sentiment as a factor at work in explaining the housing prices and supply of dwellings in the long run. Moreover, counterfactual scenarios on house price path suggests that the housing prices are sensitive to changes in sentiment as in credit volume, but with a lesser magnitude.

Dissecting Mechanisms of Financial Crises: Intermediation and Sentiment

We develop a model of financial crises with both a financial amplification mechanism, via frictional intermediation, and a role for sentiment, via time-varying beliefs about an illiquidity state. We confront the model with data on credit spreads, equity prices, credit, and output across the financial crisis cycle. In particular, we ask the model to match data on the frothy pre-crisis behavior of asset markets and credit, the sharp transition to a crisis where asset values fall, disintermediation occurs and output falls, and the post-crisis period characterized by a slow recovery in output. Our principal finding is that both the frictional intermediation mechanism and fluctuations in beliefs are needed to match the crisis cycle patterns. A pure amplification mechanism quantitatively matches the crisis and aftermath period but fails to match the pre-crisis evidence. Adding a diagnostic model of belief fluctuations that overweights recent observations fits the crisis cycle facts both qualitatively and quantitatively. A Bayesian belief updating process fits the facts qualitatively but misses the extent of pre-crisis froth quantitatively. In contrast, a lean-against-the-wind policy has a quantitatively similar impact in both versions of the belief model, indicating that policy need not “get into the minds” of investors and condition on the true belief process. Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.