Does social network sentiment influence the relationship between the S&P 500 and gold returns? |
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Institution: | 1. Department of Financial Economics and Accounting, University of Santiago de Compostela, Business Administration School, Avenida Alfonso X el Sabio, s/n, 27002 Lugo, Spain;2. Department of Business Organization and Commercialization, University of Santiago de Compostela, Business Administration School, Avenida Alfonso X el Sabio, s/n, 27002 Lugo, Spain;3. Cameron School of Business, UNC Wilmington, United States |
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Abstract: | This study explored the relationship between investor sentiment (extracted from the StockTwits social network), the S&P 500 Index and gold returns. We investigated bilateral causality between gold prices and S&P 500 prices, the power of investor sentiment and gold returns to predict S&P 500 returns, and the influence of gold returns on S&P 500 volatility. We also considered whether the influence of sentiment varies according to the user's degree of experience. We considered the sentiment of messages that mentioned the S&P 500 Index and that users posted between 2012 and 2016. Granger causality analysis, ARIMA models and GARCH models were used for predicting S&P 500 Index returns and S&P 500 volatility. We observed a causal relationship between gold price and the S&P 500 Index. Our results also suggest that sentiment and gold returns predict S&P 500 Index returns. Finally, we observed that gold returns influence S&P 500 volatility and that the sentiment of experienced users affects S&P 500 returns. |
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