Does AI Sentiment Affect Stock Returns? Evidence from Indonesia’s Banking Sector
DOI:
https://doi.org/10.35877/454RI.qems3995Keywords:
AI Sentiment, Google Trends, Bank Stock Returns, Fintech, Emerging Markets, Behavioral FinanceAbstract
This study investigates the heterogeneous effects of AI-related investor sentiment on the stock returns of Indonesian banks. Using a correlation-weighted AI Sentiment Index (AI-SVI) derived from Google Trends, panel regressions reveal that only fintech-driven banks show significant responsiveness to AI sentiment, while conventional, independent digital, and conglomerate-backed banks do not. These findings are supported by a supplementary investor perception survey, which confirms that market participants associate visible and strategic AI adoption primarily with fintech institutions. The results suggest that AI sentiment can act as a behavioral signal of valuation in emerging financial markets, but its effectiveness depends on how innovation is perceived and communicated. Policymakers and investors should be cautious in interpreting sentiment-driven movements, especially in sectors with uneven technological maturity.
References
Ayala, M. J., Gonzálvez-Gallego, N., & Arteaga-Sánchez, R. (2024). Google search volume index and investor attention in stock market: a systematic review. In Financial Innovation (Vol. 10, Issue 1). Springer Science and Business Media Deutschland GmbH. https://doi.org/10.1186/s40854-023-00606-y
Baker, M., & Wurgler, J. (2006). Investor sentiment and the cross-section of stock returns. Journal of Finance, 61(4), 1645–1680. https://doi.org/10.1111/j.1540-6261.2006.00885.x
Bonaparte, Y. (2024). Artificial Intelligence in Finance: Valuations and Opportunities. Finance Research Letters, 60. https://doi.org/10.1016/j.frl.2023.104851
Campbell, J. Y., & Shiller, R. J. (1988). The Dividend-Price Ratio and Expectations of Future Dividends and Discount Factors. In Source: The Review of Financial Studies (Vol. 1, Issue 3). https://www.jstor.org/stable/2961997
Da, Z., Engelberg, J., & Gao, P. (2015). The sum of all FEARS investor sentiment and asset prices. Review of Financial Studies, 28(1), 1–32. https://doi.org/10.1093/rfs/hhu072
Da, Z., Engelberg, J., Gao, P., Hirshleifer, D., Hou, K., Hwang, B.-H., Israelsen, R., Jagannathan, R., Jennings, R., Lepori, G., Lou, D., Loughran, T., Schaumburg, E., & Schultz, P. (2011). In Search of Attention. In THE JOURNAL OF FINANCE •: Vol. LXVI (Issue 5). http://www.google.com/trends
Ernst & Young. (2023). EY Global Financial Services Regulatory Outlook 2023. https://www.ey.com/en_gl/insights/financial-services/global-financial-services-regulatory-outlook-2023
Fama, E. F. (1970). American Finance Association Efficient Capital Markets: A Review of Theory and Empirical Work. Source: The Journal of Finance, 25(2), 383–417.
Fama, E. F., & French, K. R. (1988). Dividend yields and expected stock returns. Journal of Financial Economics, 22, 3–25.
Fama, E. F., & French, K. R. (1992). The Cross-Section of Expected Stock Returns. In Source: The Journal of Finance (Vol. 47, Issue 2).
Ghose, R., Bantanidis, S., Master, K., Shah, R. S., Yu, Y., Sharma, P., Dilaj, K., Van Kooij, B., & Zajac, A. (2024). AI in Finance - “Bot, Bank & Beyond.” https://www.citigroup.com/citi/citigps/
Hamadou, I., Yumna, A., Hamadou, H., & Jallow, M. S. (2024). Unleashing the power of artificial intelligence in Islamic banking: A case study of Bank Syariah Indonesia (BSI). Modern Finance, 2(1), 131–144. https://doi.org/10.61351/mf.v2i1.116
Lintner, J. (1965). The Valuation of Risk Assets and the Selection of Risky Investments in Stock Portfolios and Capital Budgets THE VALUATION OF RISK ASSETS AND THE SELECTION OF RISKY INVESTMENTS IN STOCK PORTFOLIOS AND CAPITAL BUDGETS *. The Review of Economics and Statistics, 47(1), 13–37.
Lui, A. K. H., Lee, M. C. M., & Ngai, E. W. T. (2022). Impact of artificial intelligence investment on firm value. Annals of Operations Research, 308(1–2), 373–388. https://doi.org/10.1007/s10479-020-03862-8
Mossin, J. (1966). Equilibrium in a Capital Asset Market (Vol. 34, Issue 4).
Padungsaksawasdi, C., Treepongkaruna, S., & Brooks, R. (2019). Investor attention and stock market activities: New evidence from panel data. International Journal of Financial Studies, 7(2). https://doi.org/10.3390/ijfs7020030
Preis, T., Moat, H. S., & Eugene Stanley, H. (2013). Quantifying trading behavior in financial markets using google trends. Scientific Reports, 3. https://doi.org/10.1038/srep01684
Sharpe, W. F. (1964). CAPITAL ASSET PRICES: A THEORY OF MARKET EQUILIBRIUM UNDER CONDITIONS OF RISK. The Journal of Finance, 19(3), 425–442. https://doi.org/10.1111/j.1540-6261.1964.tb02865.x
Stambaugh, R. F., Yu, J., & Yuan, Y. (2012). The short of it: Investor sentiment and anomalies. Journal of Financial Economics, 104(2), 288–302. https://doi.org/10.1016/j.jfineco.2011.12.001
Swamy, V., & Dharani, M. (2019). Investor attention using the Google search volume index – impact on stock returns. Review of Behavioral Finance, 11(1), 55–69. https://doi.org/10.1108/RBF-04-2018-0033
World Bank. (2023). DIGITAL PROGRESS AND TRENDS REPORT 2023. https://documents1.worldbank.org/curated/en/099031924192524293/pdf/P180107173682d0431bf651fded74199f10.pdf
Baker, M., & Wurgler, J. (2006). Investor sentiment and the cross-section of stock returns. Journal of Finance, 61(4), 1645–1680. https://doi.org/10.1111/j.1540-6261.2006.00885.x
Bonaparte, Y. (2024). Artificial Intelligence in Finance: Valuations and Opportunities. Finance Research Letters, 60. https://doi.org/10.1016/j.frl.2023.104851
Campbell, J. Y., & Shiller, R. J. (1988). The Dividend-Price Ratio and Expectations of Future Dividends and Discount Factors. In Source: The Review of Financial Studies (Vol. 1, Issue 3). https://www.jstor.org/stable/2961997
Da, Z., Engelberg, J., & Gao, P. (2015). The sum of all FEARS investor sentiment and asset prices. Review of Financial Studies, 28(1), 1–32. https://doi.org/10.1093/rfs/hhu072
Da, Z., Engelberg, J., Gao, P., Hirshleifer, D., Hou, K., Hwang, B.-H., Israelsen, R., Jagannathan, R., Jennings, R., Lepori, G., Lou, D., Loughran, T., Schaumburg, E., & Schultz, P. (2011). In Search of Attention. In THE JOURNAL OF FINANCE •: Vol. LXVI (Issue 5). http://www.google.com/trends
Ernst & Young. (2023). EY Global Financial Services Regulatory Outlook 2023. https://www.ey.com/en_gl/insights/financial-services/global-financial-services-regulatory-outlook-2023
Fama, E. F. (1970). American Finance Association Efficient Capital Markets: A Review of Theory and Empirical Work. Source: The Journal of Finance, 25(2), 383–417.
Fama, E. F., & French, K. R. (1988). Dividend yields and expected stock returns. Journal of Financial Economics, 22, 3–25.
Fama, E. F., & French, K. R. (1992). The Cross-Section of Expected Stock Returns. In Source: The Journal of Finance (Vol. 47, Issue 2).
Ghose, R., Bantanidis, S., Master, K., Shah, R. S., Yu, Y., Sharma, P., Dilaj, K., Van Kooij, B., & Zajac, A. (2024). AI in Finance - “Bot, Bank & Beyond.” https://www.citigroup.com/citi/citigps/
Hamadou, I., Yumna, A., Hamadou, H., & Jallow, M. S. (2024). Unleashing the power of artificial intelligence in Islamic banking: A case study of Bank Syariah Indonesia (BSI). Modern Finance, 2(1), 131–144. https://doi.org/10.61351/mf.v2i1.116
Lintner, J. (1965). The Valuation of Risk Assets and the Selection of Risky Investments in Stock Portfolios and Capital Budgets THE VALUATION OF RISK ASSETS AND THE SELECTION OF RISKY INVESTMENTS IN STOCK PORTFOLIOS AND CAPITAL BUDGETS *. The Review of Economics and Statistics, 47(1), 13–37.
Lui, A. K. H., Lee, M. C. M., & Ngai, E. W. T. (2022). Impact of artificial intelligence investment on firm value. Annals of Operations Research, 308(1–2), 373–388. https://doi.org/10.1007/s10479-020-03862-8
Mossin, J. (1966). Equilibrium in a Capital Asset Market (Vol. 34, Issue 4).
Padungsaksawasdi, C., Treepongkaruna, S., & Brooks, R. (2019). Investor attention and stock market activities: New evidence from panel data. International Journal of Financial Studies, 7(2). https://doi.org/10.3390/ijfs7020030
Preis, T., Moat, H. S., & Eugene Stanley, H. (2013). Quantifying trading behavior in financial markets using google trends. Scientific Reports, 3. https://doi.org/10.1038/srep01684
Sharpe, W. F. (1964). CAPITAL ASSET PRICES: A THEORY OF MARKET EQUILIBRIUM UNDER CONDITIONS OF RISK. The Journal of Finance, 19(3), 425–442. https://doi.org/10.1111/j.1540-6261.1964.tb02865.x
Stambaugh, R. F., Yu, J., & Yuan, Y. (2012). The short of it: Investor sentiment and anomalies. Journal of Financial Economics, 104(2), 288–302. https://doi.org/10.1016/j.jfineco.2011.12.001
Swamy, V., & Dharani, M. (2019). Investor attention using the Google search volume index – impact on stock returns. Review of Behavioral Finance, 11(1), 55–69. https://doi.org/10.1108/RBF-04-2018-0033
World Bank. (2023). DIGITAL PROGRESS AND TRENDS REPORT 2023. https://documents1.worldbank.org/curated/en/099031924192524293/pdf/P180107173682d0431bf651fded74199f10.pdf
Downloads
Published
2025-06-10
How to Cite
Junanta, G., & Rokhim, R. (2025). Does AI Sentiment Affect Stock Returns? Evidence from Indonesia’s Banking Sector. Quantitative Economics and Management Studies, 6(3), 456–469. https://doi.org/10.35877/454RI.qems3995
Issue
Section
Articles
