Explaining bank stock performance with crisis sentiment

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

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: Jul 24, 2020
• 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