Internet search-based investor sentiment and value premium

We study how unexpected change in Internet search-based investor sentiment affects subsequent value premium in the U.S. stock market. For the investor sentiment, we use a sentiment that is based on individual investors' Internet search activity. We argue that stocks that are considered to be more sensitive to fluctuations in investor sentiment, like financially distressed (proxied by high book-to-market ratio) stocks, should also be more affected by unexpected changes in the sentiment. We find that an unexpected increase in optimism (pessimism) in the sentiment predicts positive (negative) subsequent value premium in the U.S stock market.