Investor Emotions and Earnings Announcements

Journal of Behavioral and Experimental Finance; https://doi.org/10.1016/j.jbef.2021.100474

67 Pages Posted: 22 Jun 2020 Last revised: 20 Dec 2021

Date Written: June 13, 2020

Abstract

Armed with a decade of social media data, I explore the impact of investor emotions on earnings announcements. In particular, I test whether the emotional content of firm-specific messages posted on social media just prior to a firm's earnings announcement predicts its earnings and announcement returns. I find that investors are typically excited about firms that end up exceeding expectations, yet their enthusiasm results in lower announcement returns. Specifically, a standard deviation increase in excitement is associated with an 7.8 basis points lower announcement return, which translates into an approximately -5.8% annualized loss. My findings confirm that emotions and market dynamics are closely related and highlight the importance of considering investor emotions when assessing a firm's short-term value.

Keywords: deep learning, investor emotions, capital markets

JEL Classification: G41, L82

Suggested Citation

Vamossy, Domonkos F., Investor Emotions and Earnings Announcements (June 13, 2020). Journal of Behavioral and Experimental Finance; https://doi.org/10.1016/j.jbef.2021.100474, Available at SSRN: https://ssrn.com/abstract=3626025 or http://dx.doi.org/10.2139/ssrn.3626025

Domonkos F. Vamossy (Contact Author)

University of Pittsburgh ( email )

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