The Relationships Between Sentiment, Returns and Volatility

Yaw-Huei Wang; Aneel Keswani; Stephen Taylor;

RELATED

Related Papers     Patents    Grants    Venues    Experts    Cite    Share    Save

ABSTRACT

Previous papers that test whether sentiment is useful for predicting volatility ignore whether lagged returns information might also be useful for this purpose. By doing so, these papers potentially overestimate the role of sentiment in predicting volatility. In this paper we test whether sentiment is useful for volatility forecasting purposes. We find that most of our sentiment measures are caused by returns and volatility rather than vice versa. In addition, we find that lagged returns cause volatility. All sentiment variables have extremely limited forecasting power once returns are included as a forecasting variable.

 Paraphrase     Questionfy     Wikify     Simplify     Summarize