ABSTRACT
This paper examines the investor reaction of firm-specific pessimistic sentiment extracted from Twitter messages during the pandemic period due to the Covid-19. We find that Twitter sentiment predicts stock returns without subsequent reversals. This finding is consistent with the view that tweets provide information not already reflected in stock prices during the pandemic period. We investigate possible sources of return predictability with a Twitter sentiment. The results show that Twitter's pessimistic sentiment towards the Covid-19 provides new information about the investor. This information explains about one-third of the predictive ability of Twitter sentiment for stock returns. Our findings shed new light on the predictive value of social media content for stock returns. © 2021 International Consortium for Electronic Business. All rights reserved.