Download This PaperBubble Sentiment
32 Pages Posted: 23 Nov 2020
Date Written: January 1, 2020
Abstract
I examine the difference in news sentiment between stock price run-ups that crash (bubble stocks) and do not crash (non-bubble stocks). I find that bubble stocks have more negative sentiment in earnings news during their run-ups. The negative sentiment has predictive power up to two years in advance that a run-up is a bubble and will crash. I do not observe similar predictability from positive earnings news or news unrelated to earnings. I find that past negative sentiment in earnings news also predicts a bubble’s future maximum drawdown.
Keywords: Bubble, News Sentiment
JEL Classification: G4, G1
Suggested Citation: Suggested Citation
Li, Gen, Bubble Sentiment (January 1, 2020). Available at SSRN: https://ssrn.com/abstract=3659891 or http://dx.doi.org/10.2139/ssrn.3659891
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