Does the source of uncertainty matter? The impact of financial, newspaper and Twitter-based measures on U.S. banks

Research in International Business and Finance, Volume 65, April 2023.

34 Pages Posted: 7 Jun 2022 Last revised: 27 Mar 2023

See all articles by Stephan Bales

Stephan Bales

University of Hohenheim

Kaspar Burghartz

University of Basel - Department of Finance

Hans-Peter Burghof

University of Hohenheim

Lukas Hitz

University of Basel - Center for Economic Science (WWZ) - Department of Finance

Date Written: December 6, 2022

Abstract

This study examines if the source of uncertainty (newspaper, Twitter, financial market) matters in its impact on bank stock returns in the United States. By applying discrete wavelet transformation, we model directional spillovers and Granger causality between uncertainty and bank returns for different time horizons. Our results demonstrate that this distinction between time horizons is crucial. Although newspaper and Twitter-based measures are correlated, they capture a different source of investor perception. Twitter-based uncertainty adversely affects bank stocks in the short run, while newspaper-based policy uncertainty is relevant in the medium run. Financial-based uncertainty, VIX, is the most important factor. Moreover, we find that the impact of uncertainty on bank returns is stronger during the COVID-19 pandemic and for banks with a high ratio of loans to total assets and large off-balance-sheet activities.

Keywords: Bank returns, Twitter uncertainty, Policy uncertainty, VIX, Wavelets

JEL Classification: C40, F30, G15, G21

Suggested Citation

Bales, Stephan and Burghartz, Kaspar and Burghof, Hans-Peter and Hitz, Lukas, Does the source of uncertainty matter? The impact of financial, newspaper and Twitter-based measures on U.S. banks (December 6, 2022). Research in International Business and Finance, Volume 65, April 2023., Available at SSRN: https://ssrn.com/abstract=4126259 or http://dx.doi.org/10.2139/ssrn.4126259

Stephan Bales (Contact Author)

University of Hohenheim ( email )

Fruwirthstr. 48
Stuttgart, 70599
Germany

Kaspar Burghartz

University of Basel - Department of Finance ( email )

Holbeinstrasse 12
Basel, CH-4051
Switzerland

Hans-Peter Burghof

University of Hohenheim ( email )

Schloss Hohenheim
510F
Stuttgart, 70599
Germany
+49 711 459 22900 (Phone)
+49 711 459 23448 (Fax)

Lukas Hitz

University of Basel - Center for Economic Science (WWZ) - Department of Finance ( email )

Peter Merian Weg 6
Basel, 4002
Switzerland
+41612073193 (Phone)

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