Is a sentiment-based trading strategy profitable?

IF 1.2 4区经济学 Q3 BUSINESS, FINANCE Investment Analysts Journal Pub Date : 2022-04-03 DOI:10.1080/10293523.2022.2076373

Karam Kim, Doojin Ryu, Jinyoung Yu

引用次数: 6

Abstract

ABSTRACT We examine whether sentiment indices predict individual firms’ stock returns and evaluate the performances of sentiment-based trading strategies in the Korean equity market. We find that the sentiment indices (constructed using the principal component analysis (PCA) and overnight stock returns) positively predict stock price movements, whereas news sentiment does not significantly determine future stock returns. A comparison of portfolio performances among sentiment indices reveals that the long-short equity strategy based on PCA sentiment changes yields the highest return – a result that is not explained by well-known risk factors. Moreover, investors may earn even greater returns by employing multiple sentiment measures when constructing portfolios, suggesting that each measure reflects different aspects of investor sentiment.

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基于情绪的交易策略有利可图吗？

摘要我们研究了情绪指数是否能预测单个公司的股票回报，并评估了韩国股市中基于情绪的交易策略的表现。我们发现，情绪指数（使用主成分分析（PCA）和隔夜股票回报构建）正预测股价走势，而新闻情绪并不能显著决定未来股票回报。对情绪指数之间投资组合表现的比较表明，基于PCA情绪变化的多空股票策略产生了最高的回报——这一结果无法用众所周知的风险因素来解释。此外，投资者在构建投资组合时，通过采用多种情绪指标，可能会获得更高的回报，这表明每种指标都反映了投资者情绪的不同方面。

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来源期刊

Investment Analysts Journal BUSINESS, FINANCE-

CiteScore

1.90

自引率

11.10%

发文量

期刊介绍： The Investment Analysts Journal is an international, peer-reviewed journal, publishing high-quality, original research three times a year. The journal publishes significant new research in finance and investments and seeks to establish a balance between theoretical and empirical studies. Papers written in any areas of finance, investment, accounting and economics will be considered for publication. All contributions are welcome but are subject to an objective selection procedure to ensure that published articles answer the criteria of scientific objectivity, importance and replicability. Readability and good writing style are important. No articles which have been published or are under review elsewhere will be considered. All submitted manuscripts are subject to initial appraisal by the Editor, and, if found suitable for further consideration, to peer review by independent, anonymous expert referees. All peer review is double blind and submission is via email. Accepted papers will then pass through originality checking software. The editors reserve the right to make the final decision with respect to publication.