Beyond Market Mood: Firm Sentiment and the Response to Corporate Earnings Announcements

51 Pages Posted: 3 Mar 2017 Last revised: 25 Aug 2018

See all articles by Nikolaos Karampatsas

Nikolaos Karampatsas

University of Surrey - Surrey Business School

Soheila Malekpour

University of Surrey - Surrey Business School

Andrew Mason

University of Surrey - Surrey Business School

Date Written: June 6, 2018

Abstract

Using a unique database this study establishes a relationship between firm-specific investor sentiment and stock price movements around earnings announcements. We find that firm-specific investor sentiment is a key determinant of price adjustment in the context of an earnings surprise. Unsurprisingly, the effect of firm-specific investor sentiment dominates the effect of market-wide sentiment. We also provide evidence that the effect of firm-specific investor sentiment is more pronounced for stocks that are hard to value and difficult to arbitrage and stock price reactions are most marked for stocks with negative earnings announcements. Further we find evidence of mispricing and return reversals over the days following an earnings surprise.

Keywords: Investor sentiment, Asset pricing, Social media, Twitter, Earnings surprises.

JEL Classification: G02, G11, G12, G14

Suggested Citation

Karampatsas, Nikolaos and Malekpourkolbadinejad, Soheila and Mason, Andrew, Beyond Market Mood: Firm Sentiment and the Response to Corporate Earnings Announcements (June 6, 2018). Available at SSRN: https://ssrn.com/abstract=2926368 or http://dx.doi.org/10.2139/ssrn.2926368

Nikolaos Karampatsas

University of Surrey - Surrey Business School ( email )

Guildford, Surrey GU2 7XH
United Kingdom

Soheila Malekpourkolbadinejad

University of Surrey - Surrey Business School ( email )

Guildford
Guildford, Surrey GU2 5XH
United Kingdom

Andrew Mason (Contact Author)

University of Surrey - Surrey Business School ( email )

Guildford, Surrey GU2 5XH
United Kingdom
+44-1483-683093 (Phone)

HOME PAGE: http://www2.surrey.ac.uk/management/people/andrew_mason/

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