Version 1
: Received: 16 October 2024 / Approved: 16 October 2024 / Online: 16 October 2024 (11:17:00 CEST)
How to cite:
Ahadzie, R. M.; Owusu Junior, P.; Woode, J. K. The Impact of Sentiment on Realized Higher-Order Moments in the S&P 500: Evidence from the Fear and Greed Index. Preprints2024, 2024101281. https://doi.org/10.20944/preprints202410.1281.v1
Ahadzie, R. M.; Owusu Junior, P.; Woode, J. K. The Impact of Sentiment on Realized Higher-Order Moments in the S&P 500: Evidence from the Fear and Greed Index. Preprints 2024, 2024101281. https://doi.org/10.20944/preprints202410.1281.v1
Ahadzie, R. M.; Owusu Junior, P.; Woode, J. K. The Impact of Sentiment on Realized Higher-Order Moments in the S&P 500: Evidence from the Fear and Greed Index. Preprints2024, 2024101281. https://doi.org/10.20944/preprints202410.1281.v1
APA Style
Ahadzie, R. M., Owusu Junior, P., & Woode, J. K. (2024). The Impact of Sentiment on Realized Higher-Order Moments in the S&P 500: Evidence from the Fear and Greed Index. Preprints. https://doi.org/10.20944/preprints202410.1281.v1
Chicago/Turabian Style
Ahadzie, R. M., Peterson Owusu Junior and John Kingsley Woode. 2024 "The Impact of Sentiment on Realized Higher-Order Moments in the S&P 500: Evidence from the Fear and Greed Index" Preprints. https://doi.org/10.20944/preprints202410.1281.v1
Abstract
This study empirically investigates the relationship between realized higher-order moments and the Fear and Greed Index as a measure of sentiments. We estimate daily realized moments for five different sentiment levels using 5-minute return data of the S&P 500 index from January 3, 2011, to September 18, 2020. We found that the Fear and Greed Index significantly impacts realized volatility during periods of extreme fear. Additionally, various sentiment indicators influence realized skewness and realized kurtosis. The VIX index significantly reduces realized skewness across all sentiment levels. Bearish and bullish sentiments have a significant negative relationship with negative realized skewness during periods of extreme fear and extreme greed. Conversely, the Fear and Greed index, bearish and bullish sentiments have a significant positive relationship with positive realized skewness. During extreme fear, the Fear and Greed index, bearish, and bullish sentiments have a significant negative relationship with realized kurtosis. These results remain consistent when considering the non-linear characteristics of the Fear and Greed Index during periods of extreme fear and extreme greed. These findings highlight the relevance of understanding sentiment in financial risk management and its significant relationship with asymmetric and extremity characteristics of asset returns.
Keywords
Fear and Greed Index; Realized Higher-Order Moments; Market sentiment; Asset Return Distribution; VIX Index
Subject
Business, Economics and Management, Finance
Copyright:
This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
