Abstract
Literature on investor sentiment has predominantlybeen conducted at the market level. Recent studiesemploying firm‐level sentiment have increasinglyturned to textual analysis; however, the suitability ofthis type of proxy is still unverified. We utilize theChinese stock market data from 2015 to 2023, aimingto discern whether the jump component of realizedvolatility possesses characteristics of investor sentiment.Our analysis reveals a pronounced short‐termpersistence in jump volatility, particularly, amongstocks that are hard to value and those with minimalinstitutional ownership. Further, we find that stocksexhibiting high monthly jump volatility consistentlyexhibit underperformance over extended periods,corroborating the hypothesis of sentiment‐inducedtemporary mispricing phenomena. Significantly, ourfindings advocate for the adoption of the jumpcomponent of realized volatility as a proxy for firmspecificinvestor sentiment, offering a novel perspectivein the sentiment analysis literature.
NETL
NSTL
Wiley