The Relationship between Sentiment and Risk in Financial Markets

Abstract This article estimates association coefficients between measures of market sentiment and risk in the U.S., German and Chinese markets. In terms of risk, four measures were considered: standard deviation, value at risk, expected shortfall and shortfall deviation risk. For market sentiment, data was collected using the Psych Signal technology, which is based on the behavior of investors on social networks. The results indicate significant statistical associations, with the direction of association having financial meaning. Moreover, the empirical findings are valid for all risk measurements. The results are in keeping with the Prospect Theory, since in moments when the sentiment indicates low liquidity (a negative value for the difference between Bullish and Bearish Intensities) investors try to reduce the negotiation volume, which has a positive impact on risk. On the other hand, under the inverted scenario, when sentiment indicates high liquidity, there is an increase in the negotiation volume and a consequent decrease in risk. This article is important because its observations of market sentiment as measured by social media data show a consistent relationship with measures of financial risk.

摘要 本文估算了美国、德国及中国市场中，市场情绪指标与风险指标之间的关联系数。在风险维度下，本文共考量四类测度指标：标准差（standard deviation）、风险价值（Value at Risk）、期望短缺（Expected Shortfall）以及短缺偏差风险（Shortfall Deviation Risk）。针对市场情绪，本文采用依托投资者社交媒体行为的Psych Signal技术采集相关数据。研究结果显示二者存在显著的统计学关联，且关联方向具备明确的金融内涵。此外，该实证结论对所有风险测度均适用。
研究结果与前景理论（Prospect Theory）相符：当市场情绪显示流动性偏低时（即看多强度与看空强度的差值为负值），投资者会尝试缩减交易规模，这会对风险产生正向影响。反之，在流动性偏高的反向情境下，交易规模会有所提升，风险也随之降低。
本文的重要性在于，其基于社交媒体数据测得的市场情绪观测结果，与金融风险指标间存在稳定的关联关系。