The Impact of Investor Sentiment on Stock Returns

DOI

10.2991/978-94-6463-652-9_56How to use a DOI?

Keywords

Investor sentiment; Stock returns; Media data; Investment strategy; Excess returns

Abstract

Currently, the application of alternative media data offers a new perspective for measuring investor sentiment. To better predict stock returns and achieve excess returns, this paper reviews both theoretical research on the impact of investor sentiment on stock returns and algorithms for measuring investor sentiment through alternative media data. Firstly, this paper provides a review of research conducted by scholars from various countries and eras on the effect of various types of sentiment on stock performance. It then introduces two distinct algorithms from the perspectives of traditional news media and social media, respectively, used to extract sentiment from media text and images to gauge investor sentiment reflected in media data. Finally, empirical tests are conducted to examine the relationship between investor sentiment, as derived from different algorithms, and stock returns. The results indicate that different types of investor sentiment have a significant impact on stock returns, and incorporating investor sentiment into traditional stock return prediction models can significantly improve forecasting accuracy. By summarizing the research on alternative data and the influence of investor sentiment on stock performance, this study provides investors with a comprehensive overview of stock return prediction channels, aiding in optimizing investment strategies and achieving higher actual returns.

Copyright

© 2025 The Author(s)

Open Access

Open Access This chapter is licensed under the terms of the Creative Commons Attribution-NonCommercial 4.0 International License (http://creativecommons.org/licenses/by-nc/4.0/), which permits any noncommercial use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license and indicate if changes were made.

Download article (PDF)

TY  - CONF
AU  - Ao Huang
AU  - Ruiqi Huang
PY  - 2025
DA  - 2025/02/24
TI  - The Impact of Investor Sentiment on Stock Returns
BT  - Proceedings of the International Workshop on Navigating the Digital Business Frontier for Sustainable Financial Innovation (ICDEBA 2024)
PB  - Atlantis Press
SP  - 537
EP  - 546
SN  - 2352-5428
UR  - https://doi.org/10.2991/978-94-6463-652-9_56
DO  - 10.2991/978-94-6463-652-9_56
ID  - Huang2025
ER  -