Investor climate sentiment and financial markets |
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| Institution: | 1. College of Management and Economics, Tianjin University, Tianjin 300072, PR China;2. DCU Business School, Dublin City University, Glasnevin, Dublin 9, Ireland;3. School of Finance, Nankai University, Tianjin 300350, PR China;1. Department of Accounting and Finance, The Open University Business School, Walton Hall, Milton Keynes MK7 6AA, UK;2. Centre for Business Research, University of Cambridge, Trumpington Street, Cambridge CB2 1AG, UK;1. Department of Finance, School of Business, Hohai University, China;2. Department of Management Science and Engineering, School of Business, Hohai University, China |
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| Abstract: | 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, such as the release of a report on climate change and abnormal weather events, facilitate the investor learning process and correction of the mispricing. |
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| Keywords: | Climate change Sentiment Asset pricing Sustainable investing Textual analysis |
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