Explaining Bank Stock Performance with Crisis Sentiment

52 Pages Posted: 17 Jun 2015

See all articles by Felix Irresberger

Felix Irresberger

Durham University

Janina Muhlnickel

Technical University of Dortmund

Gregor N. F. Weiss

University of Leipzig - Faculty of Economics and Management Science

Date Written: June 16, 2015

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.

Keywords: Financial crisis, bank performance, investor sentiment

JEL Classification: G21, G01, G02

Suggested Citation

Irresberger, Felix and Muhlnickel, Janina and Weiss, Gregor N. F., Explaining Bank Stock Performance with Crisis Sentiment (June 16, 2015). Journal of Banking and Finance, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2619291

Felix Irresberger

Durham University ( email )

Old Elvet
Mill Hill Lane
Durham, Durham DH1 3HP
United Kingdom

Janina Muhlnickel

Technical University of Dortmund ( email )

Emil-Figge-Straße 50
Dortmund, 44227
Germany

Gregor N. F. Weiss (Contact Author)

University of Leipzig - Faculty of Economics and Management Science ( email )

Grimmaische Str. 12
Leipzig, 04109
Germany
+49 341 97 33821 (Phone)
+49 341 97 33829 (Fax)

HOME PAGE: http://www.wifa.uni-leipzig.de/nfdl

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
186
Abstract Views
979
Rank
292,141
PlumX Metrics