Published Online:April 2025
Product Name:The IUP Journal of Applied Finance
Product Type:Article
Product Code:IJAF010425
DOI:10.71329/IUPJAF/2025.31.2.5-24
Author Name:Diego Lubian
Availability:YES
Subject/Domain:Finance
Download Format:PDF
Pages:5-24
This paper provides empirical evidence on spillover effects from G7 stock market indices returns and Twitter’s happiness sentiment index using connectedness measures based on quantile vector autoregressions for data spanning from 2009 to 2023. The analysis, based on quantile connectedness, highlights important differences in spillovers across quantiles. In general, total dynamic connectedness is greater at low and high quantiles throughout the whole period, with the noticeable exception of the Covid-19 pandemic period, where connectedness is strong at all quantiles. Further, it is found that Twitter’s happiness is a substantial net receiver of spillovers from stock returns at low and high quantiles, whereas the effect is mild at the median and conditional mean. Finally, the study offers evidence that stock returns and Twitter’s happiness are more connected following adverse shocks.
A substantial body of literature has explored the connection between sentiment and economic choices. Advocates of behavioral economics and finance theories have forcefully argued that the traditional approach based on the utility-maximizing economic agent cannot fully explain the observed irrational behavior in markets, and sentiment has emerged as a possible explanation for the observed deviations from rational behavior.