Do Investors' Sentiment Dynamics affect Stock Returns? Evidence from the US Economy

Dergiades, Theologos (2011): Do Investors' Sentiment Dynamics affect Stock Returns? Evidence from the US Economy. Published in: Economics Letters , Vol. 116, No. 3 (15 September 2012): pp. 404-407.

Abstract

This paper contributes to the understanding of the non-linear causal linkage between investors' sentiment dynamics and stock returns for the US economy. Employing the sentiment index developed by Baker and Wurgler (J. Econ. Perspect. 16: 129-151, 2007) and within a non-linear causality framework, we found that sentiment embodies significant predictive power with respect to stock returns.

• Item Type: MPRA Paper
• Language: English
• Keywords: Investors' sentiment; Stock returns; Non-linear Granger causality.
• Subjects: C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods and Methodology: General > C14 - Semiparametric and Nonparametric Methods: General; C - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables > C22 - Time-Series Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes; G - Financial Economics > G1 - General Financial Markets > G11 - Portfolio Choice ; Investment Decisions; G - Financial Economics > G1 - General Financial Markets > G14 - Information and Market Efficiency ; Event Studies ; Insider Trading

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