Risk Premium of Social Media Sentiment
Journal of Investing 26 (3): 21-28. 2017
22 Pages Posted: 14 Feb 2019
Date Written: 2017
This research investigates the predictive capability of sentiment extrapolated from three dictionaries; financial, social media and mood states. Our findings show 1) through the Fama-Macbeth regression method, social media based sentiment measures can be used as risk factors in an asset pricing framework; 2) these sentiment measures have predictive capability when used as features in a machine learning framework, and 3) adjusting returns for market effects result in positive alpha.
Keywords: sentiment analysis, risk management, forecasting
JEL Classification: C01, C32, G02, G12
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