GIFfluence: a visual approach to investor sentiment and the stock market

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Speaker: Professor David Hirshleifer, Marshall School of Business, University of Southern California 

About the seminar topic

We study dynamic visual representations as a proxy for investor sentiment about the stock market. Our sentiment index, GIFsentiment, is constructed from millions of posts in the Graphics Interchange Format (GIF) on a leading investment social media platform. GIFsentiment correlates with seasonal mood variations and the severity of COVID lockdowns. It is positively associated with contemporaneous market returns and negatively predicts returns for up to 4 weeks. The relationship is robust to controlling for textual, self-declared and emoji-based sentiment, news and retail attention proxies. These effects are stronger among portfolios that are more susceptible to mispricing and among posters whose characteristics proxy for greater behavioural bias. GIFsentiment positively predicts trading volume and market volatility. Our evidence suggests that GIFsentiment is a proxy for misperceptions that are later corrected.

Speaker bio

David Hirshleifer is Distinguished Professor and Kirby Chair of Behavioral Finance at the Marshall School of Business, University of Southern California. He is a Fellow and former President of the American Finance Association. has served as Executive Editor of the Review of Financial Studies, co-editor of the Journal of Financial Economics, director of the American and Western Finance Associations, and co-editor and associate editor at leading finance, economics and business journals. In his Presidential Address to the American Finance Association, he argues for an emerging paradigm, social economics and finance, which studies how biases in the social transmission of ideas, information and behaviour affects markets and asset prices. His research interests include behavioural economics and finance, and other topics in the investments and corporate finance fields. His papers have won various research awards, including the Smith Breeden Award for outstanding paper in the Journal of Finance. He has been keynote or plenary speaker at many conferences internationally. He was previously on the faculties of the University of California, Los Angeles (UCLA), University of Michigan, and Ohio State University, and he received his PhD from the University of Chicago. In his ample spare time, he composes classical music and sight-reads on the piano.

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