Music Sentiment and Stock Returns in Sweden

Sammanfattning

This study investigates the relationship between music sentiment, a novel proxy for investor sentiment, and stock returns in Sweden. We utilise Spotify data and calculate the stream weighted average valence (SWAV) for each week in our dataset to measure aggregate sentiment. This paper extends prior research by incorporating a longer time frame, firm-specific returns and cross-industry analysis to deepen the understanding of sentiment-driven dynamics. Our results reveal a significant positive relationship between music sentiment and concurrent stock returns on the market and firm level, with evidence of subsequent price corrections the following week. At the firm level, our findings reveal that this relationship is evident regardless of industry. Further cross sectional analysis indicate that riskier, high growth and financially distressed firms exhibit heightened sensitivity to sentiment. However, these findings cross sectional findings lack robustness and calls for further research. Sweden provides an ideal setting for this analysis, given its high retail investor participation and widespread Spotify usage, which enhance the reliability of sentiment as a market indicator.