Disentangling Investor Sentiment: Mood and Economic Expectations

70 Pages Posted: 12 Feb 2016 Last revised: 15 Jul 2017

Dimitrios Kostopoulos

Leibniz Universität Hannover

Steffen Meyer

Leibniz Universität Hannover

Date Written: July 13, 2017

Abstract

In this paper, we disentangle investor sentiment into two components: mood and economic expectations. We apply acoustical analysis to the daily top ten of music downloads in iTunes for Germany to derive a novel and direct measure for mood (MOOD). We match MOOD with trading data of German individual investors. We find that when MOOD is high (positive mood), investors purchase more, particularly trading into risky and out of less-risky securities. To proxy for economic expectations, we use an already existing index (FEARS), which bases on Google search volumes of negative economic terms. We find that FEARS drives trading in the same fashion as in previous studies and that these effects significantly depend on MOOD. We conclude that there are two sources of sentiment driving individual investors, which significantly interact.

Keywords: individual investor; trading behavior; sentiment; mood; music; financial markets

JEL Classification: D03, D14, G02, G11

Suggested Citation

Kostopoulos, Dimitrios and Meyer, Steffen, Disentangling Investor Sentiment: Mood and Economic Expectations (July 13, 2017). Available at SSRN: https://ssrn.com/abstract=2731599 or http://dx.doi.org/10.2139/ssrn.2731599

Dimitrios Kostopoulos

Leibniz Universität Hannover ( email )

Königsworther Platz 1
Hannover, 30167
Germany

Steffen Meyer (Contact Author)

Leibniz Universität Hannover ( email )

Königsworther Platz 1
Hannover, DE 30167
Germany

Register to save articles to
your library

Register

Paper statistics

Downloads
188
rank
145,747
Abstract Views
1,387
PlumX