Beyond Market Mood: Stock Sentiment and the Response to Corporate Earnings Announcements 


Nikolaos Karampatsas, Soheila Malekpour, and Andrew Mason 

Surrey Business School 

 

This study establishes a relationship between stock-specific investor sentiment and stock price movements around earnings announcements. Stock-specific investor sentiment is the key determinant of price adjustment in the context of an earnings surprise. The effect of stock-specific investor sentiment dominates the effect of macro- sentiment. Finally, we provide evidence that the effect of stock-specific investor sentiment is more pronounced for stocks that are hard to value and difficult to arbitrage. 

 

Stock-specific investor sentiment is the key determinant of price adjustment in the context of an earnings surprise.

 

"The effect of stock-specific investor sentiment dominates the effect of macro-sentiment"