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Hence, a high volatility premium should indicate a strong sentiment effect on these stocks.
That is, if our 'sentiment strategy' performs better than the initial market strategy, this improved performance can be attributed to the sentiment effect. 5.
Other possible specifications of the pick matrix include a positive sentiment effect as well as weighting the absolute sentiment of each index relative to all other indexes.
We leave this investigation for further research, as our aim was foremost to test the sentiment effect on a market level.
It is very important to compare the sentiment strategy against the initial market strategy so as to assess whether sentiment information improves on the results of a strategy that does not consider the sentiment effect.
Independently of the distribution, the parameters need to be set in a way that allows for changes in the market distribution and the portfolio weights to be perceived and attributed to the sentiment effect.
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Since I tried Ludwig back in 2017, I have been constantly using it in both editing and translation. Ever since, I suggest it to my translators at ProSciEditing.

Justyna Jupowicz-Kozak
CEO of Professional Science Editing for Scientists @ prosciediting.com