Investor Climate Sentiment and Financial Markets

45 Pages Posted: 3 Feb 2021 Last revised: 6 Jun 2022

See all articles by Caterina Santi

Caterina Santi

University of Liège - HEC Liège

Date Written: September 22, 2020

Abstract

We propose to measure investor climate sentiment by performing sentiment analysis on StockTwits posts on climate change and global warming. In financial markets, stocks of emission (carbon-intensive) firms underperform clean (low-emission) stocks when investor climate sentiment is more positive. We document investors overreaction to climate change risk and reversal in longer horizons. Salient but uninformative climate change events (i.e., release of a report on climate change, high coverage of negative news on climate change, abnormal weather events, and high carbon prices) facilitate the investor learning process and correction of the mispricing.

Keywords: Climate Change, Sentiment, Asset Pricing, Sustainable Investing, Social Networks, StockTwits, Textual Analysis.

JEL Classification: G10; G12; Q54; Q58.

Suggested Citation

Santi, Caterina, Investor Climate Sentiment and Financial Markets (September 22, 2020). Available at SSRN: https://ssrn.com/abstract=3697581 or http://dx.doi.org/10.2139/ssrn.3697581

Caterina Santi (Contact Author)

University of Liège - HEC Liège ( email )

Rue Louvrex 14
Liège, 4000
Belgium

HOME PAGE: http://www.caterinasanti.com

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