Corporate sentiment and stock returns: Evidence from Russia
Abstract
Subject. Numerous studies in investment decision-making styles have consistently found evidence of psychological and emotional factors influence on stock prices led to a growing interest in the study of investor sentiment. Investor sentiment is a subjective belief on future particular stock (or the whole stock market) performance and risk that statistics are not justified.
Purpose. This paper aims to examine the relationship between the corporate sentiment and excess returns in Russian stock market.
Methodology. This research examined the corporate sentiment of Russian listed companies by using a textual analysis method using Python to extract the text tones from the Russian-written annual reports convert it into numerical form to facilitate statistical analysis and then merge the results with trading data from the Moscow exchange to explain the impact on excess returns of common stocks in the Russian financial market from 2012 to 2022.
Results. The main empirical findings suggest that the corporate sentiment identified, based on clear and mixed tones of annual reports, significantly influences investors’ expectations and explains the dynamics of stock prices observed after the publication of the report, rather than over the reporting period. Our paper is one of the first study conducted to examine the relationship between corporate sentiment and future performance in Russian stock market.
Conclusions. Corporate sentiment gives additional information explaining the difference in stock returns on the Russian stock market and can be used for the formation of a mimicking portfolio representing the systematic risk factor in the linear factor pricing models.
Metrics
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