Inside the Mind of Investors During the COVID-19 Pandemic: Evidence from the StockTwits Data

Abstract

The authors study investor beliefs—sentiment and disagreement—about stock market returns during the COVID-19 pandemic using a large number of investor messages, about 3.7 million, on a social media investing platform, StockTwits. The rich and multimodal features of StockTwits data allow the authors to explore the evolution of sentiment and disagreement within and across investors, sectors, and even industries. The authors find that sentiment (disagreement) has a sharp decrease (increase) across all investors with any investment philosophy, horizon, and experience between February 19, 2020, and March 23, 2020, when a historical market high was followed by a record drop. Surprisingly, these measures have a sharp reversal toward the end of March. However, the performance of these measures across various sectors is heterogeneous. Financial and healthcare sectors are the most pessimistic and optimistic divisions, respectively.

TOPICS: Security Analysis and Valuation, quantitative methods, big data/machine learning, financial crises and financial market history, performance measurement

Key Findings

• ▪ Daily time series of the sentiment and disagreement is not a stationary process.

• ▪ Sentiment (disagreement) has a sharp decrease (increase) across all investors with any investment philosophy, horizon, and experience between February 19, 2020, and March 23, 2020, when a historical market high was followed by a record drop.

• ▪ The financial and healthcare sectors are the most pessimistic and optimistic divisions, respectively.