Edmans, A, Fernandez-Perez, A, Garel, A and Indriawan, I (2022) Music sentiment and stock returns around the world. Journal of Financial Economics, 145 (2). pp. 234-254. ISSN 0304-405X
Abstract
This paper introduces a real-time, continuous measure of national sentiment that is language-free and thus comparable globally: the positivity of songs that individuals choose to listen to. This is a direct measure of mood that does not pre-specify certain mood-affecting events nor assume the extent of their impact on investors. We validate our music-based sentiment measure by correlating it with mood swings induced by seasonal factors, weather conditions, and COVID-related restrictions. We find that music sentiment is positively correlated with same-week equity market returns and negatively correlated with next-week returns, consistent with sentiment-induced temporary mispricing. Results also hold under a daily analysis and are stronger when trading restrictions limit arbitrage. Music sentiment also predicts increases in net mutual fund flows, and absolute sentiment precedes a rise in stock market volatility. It is negatively associated with government bond returns, consistent with a flight to safety.
More Details
Item Type: | Article |
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Subject Areas: | Finance |
Date Deposited: | 23 Nov 2021 09:31 |
Date of first compliant deposit: | 23 Nov 2021 |
Last Modified: | 15 Oct 2024 01:28 |
URI: | https://lbsresearch.london.edu/id/eprint/2142 |