Munich Personal RePEc Archive

Sentiment and sign predictability of stock returns

Pönkä, Harri (2017): Sentiment and sign predictability of stock returns.

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Abstract

We explore the relationship between investor, consumer, and business sentiment and the direction of excess stock market returns in the US. Our findings indicate that measures of investor sentiment are useful predictors, even after controlling for the predictive ability of commonly used predictors of stock returns and for the effects of recession. Measures of consumer and business sentiment do not hold similar predictive ability. The findings hold both in- and out-of-sample.

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