The Relationship between Sentiment and Risk in Financial Markets
This article estimates association coefficients between measures of market sentiment and risk in the U.S., German and Chinese markets. In terms of risk, four measures were considered: standard deviation, value at risk, expected shortfall and shortfall deviation risk. For market sentiment, data was...
| Main Authors: | , , , |
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| Format: | Article |
| Language: | English |
| Published: |
Associação Nacional de Pós-Graduação e Pesquisa em Administração (ANPAD)
2018-03-01
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| Series: | BAR: Brazilian Administration Review |
| Subjects: | |
| Online Access: | http://www.scielo.br/pdf/bar/v15n1/1807-7692-bar-15-01-e170055.pdf |
| _version_ | 1797967165526114304 |
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| author | Ana Luiza Paraboni Marcelo Brutti Righi Kelmara Mendes Vieira Vinícius Girardi da Silveira |
| author_facet | Ana Luiza Paraboni Marcelo Brutti Righi Kelmara Mendes Vieira Vinícius Girardi da Silveira |
| author_sort | Ana Luiza Paraboni |
| collection | DOAJ |
| description | This article estimates association coefficients between measures of market sentiment and risk in the U.S., German
and Chinese markets. In terms of risk, four measures were considered: standard deviation, value at risk, expected
shortfall and shortfall deviation risk. For market sentiment, data was collected using the Psych Signal technology,
which is based on the behavior of investors on social networks. The results indicate significant statistical
associations, with the direction of association having financial meaning. Moreover, the empirical findings are valid
for all risk measurements. The results are in keeping with the Prospect Theory, since in moments when the
sentiment indicates low liquidity (a negative value for the difference between Bullish and Bearish Intensities)
investors try to reduce the negotiation volume, which has a positive impact on risk. On the other hand, under the
inverted scenario, when sentiment indicates high liquidity, there is an increase in the negotiation volume and a
consequent decrease in risk. This article is important because its observations of market sentiment as measured by
social media data show a consistent relationship with measures of financial risk. |
| first_indexed | 2024-04-11T02:26:54Z |
| format | Article |
| id | doaj.art-592913be121848ffb0b29534541c523b |
| institution | Directory Open Access Journal |
| issn | 1807-7692 |
| language | English |
| last_indexed | 2024-04-11T02:26:54Z |
| publishDate | 2018-03-01 |
| publisher | Associação Nacional de Pós-Graduação e Pesquisa em Administração (ANPAD) |
| record_format | Article |
| series | BAR: Brazilian Administration Review |
| spelling | doaj.art-592913be121848ffb0b29534541c523b2023-01-02T22:35:47ZengAssociação Nacional de Pós-Graduação e Pesquisa em Administração (ANPAD)BAR: Brazilian Administration Review1807-76922018-03-01151e17005510.1590/1807-7692bar2018170055The Relationship between Sentiment and Risk in Financial MarketsAna Luiza Paraboni0Marcelo Brutti Righi1Kelmara Mendes Vieira2Vinícius Girardi da Silveira3Universidade Federal de Santa CatarinaUniversidade Federal do Rio Grande do SulUniversidade Federal de Santa MariaUniversidade Federal de Santa MariaThis article estimates association coefficients between measures of market sentiment and risk in the U.S., German and Chinese markets. In terms of risk, four measures were considered: standard deviation, value at risk, expected shortfall and shortfall deviation risk. For market sentiment, data was collected using the Psych Signal technology, which is based on the behavior of investors on social networks. The results indicate significant statistical associations, with the direction of association having financial meaning. Moreover, the empirical findings are valid for all risk measurements. The results are in keeping with the Prospect Theory, since in moments when the sentiment indicates low liquidity (a negative value for the difference between Bullish and Bearish Intensities) investors try to reduce the negotiation volume, which has a positive impact on risk. On the other hand, under the inverted scenario, when sentiment indicates high liquidity, there is an increase in the negotiation volume and a consequent decrease in risk. This article is important because its observations of market sentiment as measured by social media data show a consistent relationship with measures of financial risk.http://www.scielo.br/pdf/bar/v15n1/1807-7692-bar-15-01-e170055.pdfrisk managementmeasures of riskmarket sentimentbehavioral finance |
| spellingShingle | Ana Luiza Paraboni Marcelo Brutti Righi Kelmara Mendes Vieira Vinícius Girardi da Silveira The Relationship between Sentiment and Risk in Financial Markets BAR: Brazilian Administration Review risk management measures of risk market sentiment behavioral finance |
| title | The Relationship between Sentiment and Risk in Financial Markets |
| title_full | The Relationship between Sentiment and Risk in Financial Markets |
| title_fullStr | The Relationship between Sentiment and Risk in Financial Markets |
| title_full_unstemmed | The Relationship between Sentiment and Risk in Financial Markets |
| title_short | The Relationship between Sentiment and Risk in Financial Markets |
| title_sort | relationship between sentiment and risk in financial markets |
| topic | risk management measures of risk market sentiment behavioral finance |
| url | http://www.scielo.br/pdf/bar/v15n1/1807-7692-bar-15-01-e170055.pdf |
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