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Explaining bank stock performance with crisis sentiment

Irresberger, Felix; Mühlnickel, Janina; Weiß, Gregor N.F.

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Authors

Janina Mühlnickel

Gregor N.F. Weiß



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.

Citation

Irresberger, F., Mühlnickel, J., & Weiß, G. N. (2015). Explaining bank stock performance with crisis sentiment. Journal of Banking and Finance, 59, 311-329. https://doi.org/10.1016/j.jbankfin.2015.06.001

Journal Article Type Article
Acceptance Date Jun 4, 2015
Online Publication Date Jul 2, 2015
Publication Date 2015-10
Deposit Date Jul 23, 2020
Publicly Available Date Mar 29, 2024
Journal Journal of Banking and Finance
Print ISSN 0378-4266
Publisher Elsevier
Peer Reviewed Peer Reviewed
Volume 59
Pages 311-329
DOI https://doi.org/10.1016/j.jbankfin.2015.06.001
Public URL https://durham-repository.worktribe.com/output/1265826

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