Do US states’ responses to COVID-19 restore investor sentiment? Evidence from S&P 500 financial institutions
Abstract This paper specifically investigates the effects of US government emergency actions on the investor sentiment–financial institution stock returns relationship. Despite attempts by many studies, the literature still provides no answers concerning this nexus. Using a new firm-specific Twitter...
| Main Authors: | , , , |
|---|---|
| Format: | Article |
| Language: | English |
| Published: |
SpringerOpen
2024-03-01
|
| Series: | Financial Innovation |
| Subjects: | |
| Online Access: | https://doi.org/10.1186/s40854-023-00603-1 |
| _version_ | 1827326471941652480 |
|---|---|
| author | Kaouther Chebbi Aymen Ammari Seyed Alireza Athari Kashif Abbass |
| author_facet | Kaouther Chebbi Aymen Ammari Seyed Alireza Athari Kashif Abbass |
| author_sort | Kaouther Chebbi |
| collection | DOAJ |
| description | Abstract This paper specifically investigates the effects of US government emergency actions on the investor sentiment–financial institution stock returns relationship. Despite attempts by many studies, the literature still provides no answers concerning this nexus. Using a new firm-specific Twitter investor sentiment (TS) metric and performing a panel smooth transition regression for daily data on 66 S&P 500 financial institutions from January 1 to December 31, 2020, we find that TS acts asymmetrically, nonlinearly, and time varyingly according to the pandemic situation and US states’ responses to COVID-19. In other words, we uncover the nexus between TS and financial institution stock returns and determine that it changes with US states’ reactions to COVID-19. With a permissive government response (the first regime), TS does not impact financial institution stock returns; however, when moving to a strict government response (the overall government response index exceeds the 63.59 threshold), this positive effect becomes significant in the second regime. Moreover, the results show that the slope of the transition function is high, indicating an abrupt rather than a smooth transition between the first and second regimes. The results are robust and have important policy implications for policymakers, investment analysts, and portfolio managers. |
| first_indexed | 2024-03-07T14:46:05Z |
| format | Article |
| id | doaj.art-ccaf6e2571944ccdae7fd5b6308ef622 |
| institution | Directory Open Access Journal |
| issn | 2199-4730 |
| language | English |
| last_indexed | 2024-03-07T14:46:05Z |
| publishDate | 2024-03-01 |
| publisher | SpringerOpen |
| record_format | Article |
| series | Financial Innovation |
| spelling | doaj.art-ccaf6e2571944ccdae7fd5b6308ef6222024-03-05T20:01:30ZengSpringerOpenFinancial Innovation2199-47302024-03-0110112110.1186/s40854-023-00603-1Do US states’ responses to COVID-19 restore investor sentiment? Evidence from S&P 500 financial institutionsKaouther Chebbi0Aymen Ammari1Seyed Alireza Athari2Kashif Abbass3Finance department, School of Business, King Faisal UniversityINSEEC Business SchoolDepartment of Business Administration, Faculty of Economics and Administrative Sciences, Cyprus International UniversitySchool of Economics and Management, Nanjing University of Science and TechnologyAbstract This paper specifically investigates the effects of US government emergency actions on the investor sentiment–financial institution stock returns relationship. Despite attempts by many studies, the literature still provides no answers concerning this nexus. Using a new firm-specific Twitter investor sentiment (TS) metric and performing a panel smooth transition regression for daily data on 66 S&P 500 financial institutions from January 1 to December 31, 2020, we find that TS acts asymmetrically, nonlinearly, and time varyingly according to the pandemic situation and US states’ responses to COVID-19. In other words, we uncover the nexus between TS and financial institution stock returns and determine that it changes with US states’ reactions to COVID-19. With a permissive government response (the first regime), TS does not impact financial institution stock returns; however, when moving to a strict government response (the overall government response index exceeds the 63.59 threshold), this positive effect becomes significant in the second regime. Moreover, the results show that the slope of the transition function is high, indicating an abrupt rather than a smooth transition between the first and second regimes. The results are robust and have important policy implications for policymakers, investment analysts, and portfolio managers.https://doi.org/10.1186/s40854-023-00603-1COVID-19Financial institution stock returnsInvestor sentimentUS states’ responses |
| spellingShingle | Kaouther Chebbi Aymen Ammari Seyed Alireza Athari Kashif Abbass Do US states’ responses to COVID-19 restore investor sentiment? Evidence from S&P 500 financial institutions Financial Innovation COVID-19 Financial institution stock returns Investor sentiment US states’ responses |
| title | Do US states’ responses to COVID-19 restore investor sentiment? Evidence from S&P 500 financial institutions |
| title_full | Do US states’ responses to COVID-19 restore investor sentiment? Evidence from S&P 500 financial institutions |
| title_fullStr | Do US states’ responses to COVID-19 restore investor sentiment? Evidence from S&P 500 financial institutions |
| title_full_unstemmed | Do US states’ responses to COVID-19 restore investor sentiment? Evidence from S&P 500 financial institutions |
| title_short | Do US states’ responses to COVID-19 restore investor sentiment? Evidence from S&P 500 financial institutions |
| title_sort | do us states responses to covid 19 restore investor sentiment evidence from s p 500 financial institutions |
| topic | COVID-19 Financial institution stock returns Investor sentiment US states’ responses |
| url | https://doi.org/10.1186/s40854-023-00603-1 |
| work_keys_str_mv | AT kaoutherchebbi dousstatesresponsestocovid19restoreinvestorsentimentevidencefromsp500financialinstitutions AT aymenammari dousstatesresponsestocovid19restoreinvestorsentimentevidencefromsp500financialinstitutions AT seyedalirezaathari dousstatesresponsestocovid19restoreinvestorsentimentevidencefromsp500financialinstitutions AT kashifabbass dousstatesresponsestocovid19restoreinvestorsentimentevidencefromsp500financialinstitutions |