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The access to the contents of this doctoral thesis it is limited to the acceptance of the use conditions set by the following Creative Commons license: https://creativecommons.org/licenses/?lang=en International doctorate in Entrepreneurship and Management (IDEM) Departament d’Empresa Doctoral dissertation SYSTEMATIC RISK AND SENTIMENT: ANTECEDENTS AND MEDIATORS Kirill Angel Author Tel. +7 916 265 75 13 [email protected] Dr. Carlota Dr. Maria Teresa Dr. Josep Menendez-Plans Obis Artal Rialp Criado Supervisor Supervisor Tutor [email protected] [email protected] [email protected] Acknowledgment This thesis is the story of my last 5 years of life, starting from the first attempts to join the program and finishing with the final paper. I have devoted my time, passion and ideas to the research as much as I could, stealing it from my family, my love and friends. I hope they will forgive me. It was the time to plant and now is the time to harvest. I would like to say “thank you” to my mother for support, to my father for new approaches and to my lovely girlfriend for patience. I am very proud to be able to work with Dr. Carlota Menedez-Plans, Dr. Neus Orgaz- Guerrero and Dr. Teresa Obis Artal, I would had never been able to imagine such kind of support which they had provided to me starting from the beginning of our work and finishing with incredible support in the 3rd paper. Many thanks to Josep Rialp for his advices and support. This research gave me a great chance to become a part of scientific community and I will make all my best efforts to keep on track. Barcelona, 2019 Kirill Angel 2 Thesis abstract The main objective of this work is to study the connection between the systematic equity risk of companies located in the tourism industry and a set of information from inside of the company and the market information including investor sentiment. The purpose of the research is to analyze the connection between the main measurement of risk and a set of information among which is the investor sentiment as a representative variable of behavioral finance line of research, which is an active field of recent findings that investigates effect on the valuation of financial assets. Comparing the explaining power of the standard CAPM model with sentiment-updated models, the latter are able to give a better explanation of risk return dynamics. This thesis investigates the role that information and investor sentiment play in asset pricing and risk measure. Below presented papers are focused on the relationship that came from the point that a firm stock level is a derivative not only of a fundamental rational environment but at the same time is a part of a human mental being, reflexing personal sentiment and group narratives. We seek to know what information explain the equity risk in order to extract this information to estimate a pattern of behaviour, especially for those not listed companies don’t have beta. Our research showed that business size and growth along with three indicators of business efficiency, Consumer Prices and the Stoxx Europe 50 index explain the equity risk. The financial crisis of 2008 does not alter the behaviour of the model. In the second paper we analyzed 58 companies in US tourism industry of total set of 72 companies specifying sectors of Arts, Entertainment, Recreation and Accommodation and Food Services. The results show that the level of regression between systematic risk coefficient (β) and sentiment is dependent on high-low period of sentiment, it is stronger during high and low sentiment period and weak during neutral. We also found that high-low period of sentiment affects differently on companies from different clusters and sentiment affected companies are companies belonging to the cluster with low level of financial stability. In the third paper we made an international study of six economic areas and analyzed two large sectors of the tourism industry - Hotel and Entertainment Services and Passenger Transportation Services. Database of 673 companies was constructed and we investigated whether the investor sentiment and other information could explain systematic risk. We confirmed that the size of the database allows us to obtain a statistical model with greater explanatory power and the results show that the investor sentiment together with a combination of accounting and macroeconomic 3 information are risk explanatory variables, except for USA, Japan and India and for the subsectors of Hotels, Motels & Cruise Lines and Airlines. The investor sentiment shows a negative sign of relation to risk and other explanatory variables vary for each sector and area. Our findings are very useful for tourism enterprises management in different countries, it provides information which explain the equity risk.to facilitate efficient business management and help to objectively quantify the risk without having beta. 4 List of original articles 1. Risk management: comparative analysis of systematic risk and effect of the financial crisis on U.S. Tourism industry. Panel data research. Kirill Angel, Carlota Menendez-Plans, Neus Orgaz-Guerrero; International Journal of Contemporary Hospitality Management, 2018, Vol. 30 Issue: 3, pp.1920-1938 2. Systematic risk coefficient and sentiment: peculiarities of sentiment affected companies in US Tourism Industry Kirill Angel, Carlota Menendez-Plans; Business and economics journal, 2018, vol.9 (4):378 3. Investor sentiment and determinants of systematic risk in tourism industry. International study and panel data estimation. (2008-2017) Kirill Angel, Carlota Menendez-Plans, Teresa Orbis; working paper 5 Table of content INTRODUCTION……………………………………………………………………………8 CHAPTER I…………………………………………………………………………………12 Risk management: comparative analysis of systematic risk and effect of the financial crisis on U.S. Tourism industry. Panel data research. 1. Introduction………………………………………………………………………………..12 2. Literature review and hypotheses…………………………………………………………15 3. Data and method…………………………………………………………………………..19 4. Results and discussion…………………………………………………………………….23 4.1. Descriptive statistics………………………………………………………………….…23 4.2. Relationship between systematic risk and information…………………………………25 5. Conclusions…………………………………………………………………………….…29 6. References………………………………………………………………………….….….33 7. Annex……………………………………………………………………………………..38 CHAPTER II…………………………………………………………………………….....39 Systematic risk coefficient and sentiment: peculiarities of sentiment affected companies in US Tourism Industry 1. Introduction…………………………………………………………………………….…39 2. Literature review and hypotheses………………………………………………………...40 3. Methodology……………………………………………………………………………...54 3.1. Systematic risk estimation………………………………………………………….…..55 3.2. Compound sentiment index construction………………………………………………57 3.3. Regression between beta and compound sentiment index…………………………..…68 3.4. Cluster analysis…………………………………………………………………………70 4. Conclusions…………………………………………………………………………….…73 5. References………………………………………………………………………………...75 6. Appendix……………………………………………………………………………….…81 6 CHAPTER III……………………………………………………………………………….89 Investor sentiment and determinants of systematic risk in tourism industry. International study and panel data estimation. (2008-2017) 1. Introduction……………………………………………………………………………..…89 2. Literature review……………………………………………………………………....…..92 3. Data and method……………………………………………………………………….…102 4. Results……………………………………………………………………….…..…….....108 4.1. Descriptive statistics ………………………………………………………..….…..….108 4.2 Results of the analysis of the relationship between risk, information and investor sentiment……………………………………………………………………………..…..…109 4.2.1 Results of the analysis of the total sample and each of subsectors in the tourism industry………………………………………………………………………………….…..110 4.2.2. Results of the study in the tourism sector by geographical areas………………….…113 4.2.3 Results of the analysis of the interaction between geographic areas and economic sectors of the tourism industry………………………………………………………..….....118 5. Conclusions…………………………………………………………………………...….122 6. Implication for management………………………………………………………..…....125 7. Limitations……………………………………………………………………….……....126 8. References…………………………………………………………………………..……126 9. Annex……………………………………………………………………………….....…136 CONCLUDING REMARKS………………………………………………………….…..139 7 INTRODUCTION The core concept of the research is based on relationship between information, sentiment and risk. We analyze tourism industry around the world to be able to estimate systematic risk better. For the first, we go through standard Capital Asset Pricing Model (CAPM) trying to define the variables, which influence on systematic risk coefficient (β), so far understanding the antecedents of risk level and cost of capital. Second, we add behavioral finance mediators to measure stock volatility in relation to market in USA. And finally, we combine sentiment and market/internal information to measure beta in different countries and economic areas, providing the mix of most reliable mediators and model. The dissertation is structured as an essay of three papers. Our first work