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Explaining bank stock performance with crisis sentiment

Irresberger, Felix, 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: Published Online
Status: Published
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: 04 Jun 2017 09:26
URI: http://orca.cf.ac.uk/id/eprint/95081

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