The Journal of Finance publishes leading research across all the major fields of finance. It is one of the most widely cited journals in academic finance, and in all of economics. Each of the six issues per year reaches over 8,000 academics, finance professionals, libraries, and government and financial institutions around the world. The journal is the official publication of The American Finance Association, the premier academic organization devoted to the study and promotion of knowledge about financial economics.
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Sentiment during Recessions
Published: 01/30/2013 | DOI: 10.1111/jofi.12027
DIEGO GARCÍA
This paper studies the effect of sentiment on asset prices during the 20th century (1905 to 2005). As a proxy for sentiment, we use the fraction of positive and negative words in two columns of financial news from the New York Times. The main contribution of the paper is to show that, controlling for other well‐known time‐series patterns, the predictability of stock returns using news' content is concentrated in recessions. A one standard deviation shock to our news measure during recessions predicts a change in the conditional average return on the DJIA of 12 basis points over one day.
Sports Sentiment and Stock Returns
Published: 08/14/2007 | DOI: 10.1111/j.1540-6261.2007.01262.x
ALEX EDMANS, DIEGO GARCÍA, ØYVIND NORLI
This paper investigates the stock market reaction to sudden changes in investor mood. Motivated by psychological evidence of a strong link between soccer outcomes and mood, we use international soccer results as our primary mood variable. We find a significant market decline after soccer losses. For example, a loss in the World Cup elimination stage leads to a next‐day abnormal stock return of −49 basis points. This loss effect is stronger in small stocks and in more important games, and is robust to methodological changes. We also document a loss effect after international cricket, rugby, and basketball games.