Do Emotions Expressed in the Social and News Media Impact on Investor Behaviour?

The study examines the relationship between emotions generated by the social and news media and the decision-making process of investors. The 11 different emotions that we evaluate are calculated on an on-going basis by applying advanced algorithms which scan the social and news media. We then align these emotions with corporate earnings announcements in order to gauge whether the investor response to the announcements is conditioned by the prevailing state of the emotions at the time of the earnings release. We find substantial evidence to suggest that the 11 different emotion indices have an impact on how investors respond to earnings announcements (of both good and bad news). Further we find it is the emotion emanating from the social media postings that have a larger impact on investor behaviour (and so markets) than those generated by scanning the news media. _____________________________________________________________________________ * School of Accounting Finance and Economics, Waikato Management School, University of Waikato ** Finance Discipline Group, University of Technology Sydney