The Effects of Investor Emotions Sentiments on Crude Oil Returns : A Time and Frequency Dynamics Analysis

We investigate the co-movement between oil-specific emotions sentiments and the crude oil returns over time-scales and frequencies. Using wavelet coherence analysis, we find that sentiment is statistically significant coherence with oil returns both over time and frequencies. The pleasant emotion sentiments (optimism and trust) are statistically significant and positively associated with crude oil returns, while unpleasant emotion sentiments (fear and anger) are negatively correlated with oil returns. Additionally, we find that oil returns are most sentiment-sensitive during the turbulent periods