The role of issuer announcement sentiment in share price discovery. Evidence from the Baltic stock exchanges

The study analyses the impact of issuer announcement sentiment on the dynamics of share prices in the Nasdaq Baltic Markets in 2018–2023. Analysis shows that Loughran and McDonald dictionary performs the best in explaining the issuer announcement sentiment among the dictionaries we tested and that the sentiment has become more positive over time. To evaluate the relationship between the share price dynamics and the issuer announcement sentiment, we use panel data econometric models. Our results demonstrate that negative sentiment is more related to share price dynamics than positive sentiment. In addition, extremely negative sentiment values are more influential than moderately toned announcements. Besides sentiment, technical price indicators, financial market and macroeconomic indicators, and financials also can be important explanatory factors of stock returns. Our results are consistent with several robustness tests.