Investor Climate Sentiment and Financial Markets
45 Pages Posted: 3 Feb 2021 Last revised: 12 Aug 2022
Date Written: September 22, 2020
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: Suggested Citation