Explaining bank stock performance with crisis sentiment

Irresberger, Felix ORCID: https://orcid.org/0000-0002-7181-9190, Mühlnickel, Janina and Weiß, Gregor 2015. Explaining bank stock performance with crisis sentiment. Journal of Banking & Finance 59 , pp. 311-329. 10.1016/j.jbankfin.2015.06.001

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Abstract

Using search volume data on crisis-related queries from Google Trends, we estimate three different measures of market-level and individual crisis sentiment. We find that the stock performance of international banks during the period Q1 2004 to Q4 2012 was significantly driven by investors’ irrational market-wide crisis sentiment. Our empirical analysis shows that irrational market-wide crisis sentiment leads investors to devalue bank stocks irrespective of idiosyncratic or macroeconomic fundamentals. Comparing this finding with results for a sample of non-financial companies, we find evidence in support of the notion that the effect of crisis sentiment on stock returns is strongest in the absence of implicit bailout guarantees.

Item Type:	Article
Date Type:	Publication
Status:	Published
Schools:	Schools > Business (Including Economics)
Subjects:	H Social Sciences > HG Finance
Uncontrolled Keywords:	Financial crisis; Bank performance; Investor sentiment
Publisher:	Elsevier
ISSN:	0378-4266
Date of Acceptance:	4 June 2015
Last Modified:	01 Nov 2022 11:28
URI:	https://orca.cardiff.ac.uk/id/eprint/95081

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