Journal of Banking & Finance Vol. 59 2015
Explaining bank stock performance with crisis sentiment
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.
- DOI
- 10.1016/j.jbankfin.2015.06.001
- Volume
- 59
- Pages
- 311-329
- Language
- en
- Sources
- openalex crossref bibtex:phds-export.bib