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Investor Sentiment Volatility And Stock Return Comovements
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Book Synopsis Investor Sentiment, Volatility and Stock Return Comovements by : Abhijeet Chandra
Download or read book Investor Sentiment, Volatility and Stock Return Comovements written by Abhijeet Chandra and published by . This book was released on 2013 with total page 32 pages. Available in PDF, EPUB and Kindle. Book excerpt: We study the stock return comovements from two different perspectives, one being trading behaviour-induced return comovements and the other volatility-induced return comovements. Following Baker and Wurglur (2006), we construct an investor sentiment index and examine whether it has relationship with return comovements induced by investor's trading behaviour and market volatility. We find that a correlated trading behaviour along with investor sentiment significantly determines excess stock returns. Also stocks with high volatility exhibit higher return comovement properties compared to low volatilie stocks. In a cross-sectional framework, we find higher level of market uncertainty characterized by more biased investor sentiment induces highly correlated trading behaviour and thereby generates stronger correlated returns, causing stronger return comovements. The findings from our study imply that irrational and idiosyncratic sentiment of market participants, particularly which of investors, causes significant return comovement.
Book Synopsis Excess Stock Return Comovements and the Role of Investor Sentiment by : Bart Frijns
Download or read book Excess Stock Return Comovements and the Role of Investor Sentiment written by Bart Frijns and published by . This book was released on 2017 with total page 25 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper investigates whether investor sentiment can explain stock return comovements. Our findings demonstrate that since the 1960s, there has been a clear and rapid increase in correlations between international equity markets. Decomposing the equity returns into fundamental and non-fundamental components reveals that the increased correlation is driven by the non-fundamental part. We find that stock return comovements are mainly driven by investor sentiment, which explains the level, variance, and covariance of the non-fundamental component of returns.
Book Synopsis Essays on Investors' Sentiment and Attention by : Daniele Ballinari
Download or read book Essays on Investors' Sentiment and Attention written by Daniele Ballinari and published by . This book was released on 2021 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: The first paper investigates the predictive power of investors' sentiment and attention for the stock returns' volatility. We introduce a novel and extensive dataset that combines information from social media platforms, news articles, search engine data, and information consumption. Applying a state-of-the-art sentiment classification technique, we construct measures of investors' sentiment and attention for 18 U.S. stocks and the financial market in general. We identify investors' attention, as measured by the number of Google searches on financial keywords (e.g. «financial market» and «stock market»), and the daily volume of company-specific short messages posted on the social media platform StockTwits to be the most relevant variables. The second paper investigates a potential driver of the predictive power documented in the first paper. We focus on news releases of 360 U.S. companies from the S&P 500 universe and analyze how investors' attention affects the speed at which new information is incorporated in stock prices. Our results show that higher investors' attention around news releases is related to higher contemporaneous volatility. Further, retail investor attention increases the post-announcement volatility, whereas institutional investor attention has a small but negative impact on volatility on days following news releases. The third paper extends the analysis of the first paper to the multivariate stock return volatility. Building on the theoretical and empirical evidence that links the price comovements with retail investors' behavior, we analyze the predictive power of retail investors' sentiment and attention for the realized correlation matrix of 35 Dow Jones stocks. We propose a new model of realized covariances that allows exogenous predictors to influence the correlation dynamics while ensuring the predicted matrices' positive definiteness. Using this model, we find retail investors' attention to have predictive power for return correlations, especially for longer forecasting horizons and during the COVID-19 pandemic. The last paper analyzes in more detail the time-series properties of the daily online investor sentiment measures used in the first two papers. We detect structural breaks in the sentiment series for most of the 360 U.S. companies considered in this paper. We illustrate the economic significance of this finding with a return prediction exercise.
Book Synopsis Another Look at Stock Return Comovement by : Kaihua Deng
Download or read book Another Look at Stock Return Comovement written by Kaihua Deng and published by . This book was released on 2015 with total page 92 pages. Available in PDF, EPUB and Kindle. Book excerpt: The study of the comovement between asset returns reflects an ongoing effort by economists to understand investment risk in financial markets. Building on previous findings, in the current thesis I provide some new evidence on this topic with a focus on large-cap stocks and highlight an innovative way to evaluate the statistical significance of comovement asymmetry. In the first part of the thesis, I revisit the question of how large-cap stock return comovement varies with volatility and market returns. I propose the use of an eigenvalue-based measure of comovement in a multivariate semi-Markov-switching framework. I conduct various model evaluation checks and compare the new results with that based on a benchmark. I estimate models with two to four regimes and consider the impact of sample selection and outlier reduction. Contrary to the sweeping sentiment that comovement is highest when market is down and volatile, I illustrate the significance of comovement differential across states and find in most case studies evidence that suggests otherwise. In the second part, I propose a test of asymmetric stock return comovement across states. The test can be viewed as a variation of Kendall's [unknown mathematical symbol] conditional on the state and has an asymptotic X^2-distribution. A refined version of the test is derived based on the Markov chain theory of regenerative cycles which substantially improves finite sample size and power. I show that the test has power against local alternatives, which is nonetheless compromised due to a finite sample convergence bound put on the implied local alternative data generating process. I evaluate the new test against traditional correlation-based measures and demonstrate power attrition due to nuisance parameters when states are ignored. I find that asymmetric tail dependence becomes much less significant when considered state by state. A list of related tests is given as an extension at the end.
Book Synopsis Behavioral Corporate Finance by : Hersh Shefrin
Download or read book Behavioral Corporate Finance written by Hersh Shefrin and published by College Ie Overruns. This book was released on 2017-04-16 with total page 300 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author :New York Stock Exchange. Market Volatility and Investor Confidence Panel Publisher : ISBN 13 : Total Pages :396 pages Book Rating :4.:/5 ( download)
Book Synopsis Market Volatility and Investor Confidence by : New York Stock Exchange. Market Volatility and Investor Confidence Panel
Download or read book Market Volatility and Investor Confidence written by New York Stock Exchange. Market Volatility and Investor Confidence Panel and published by . This book was released on 1990 with total page 396 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Investor Sentiment and the Cross-section of Stock Returns by : Malcolm Baker
Download or read book Investor Sentiment and the Cross-section of Stock Returns written by Malcolm Baker and published by . This book was released on 2004 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt: We examine how investor sentiment affects the cross-section of stock returns. Theory predicts that a broad wave of sentiment will disproportionately affect stocks whose valuations are highly subjective and are difficult to arbitrage. We test this prediction by studying how the cross-section of subsequent stock returns varies with proxies for beginning-of-period investor sentiment. When sentiment is low, subsequent returns are relatively high on smaller stocks, high volatility stocks, unprofitable stocks, non-dividend-paying stocks, extreme-growth stocks, and distressed stocks, consistent with an initial underpricing of these stocks. When sentiment is high, on the other hand, these patterns attenuate or fully reverse. The results are consistent with predictions and appear unlikely to reflect an alternative explanation based on compensation for systematic risk.
Book Synopsis The Internationalization of Equity Markets by : Jeffrey A. Frankel
Download or read book The Internationalization of Equity Markets written by Jeffrey A. Frankel and published by University of Chicago Press. This book was released on 2008-04-15 with total page 428 pages. Available in PDF, EPUB and Kindle. Book excerpt: This timely volume addresses three important recent trends in the internationalization of United States equity markets: extensive market integration through foreign investment and links among stock prices around the world; increasing securitization as countries such as Japan come to rely more than ever before on markets in equities and bonds at the expense of banks; and the opening of national financial systems of newly industrializing countries to international financial flows and institutions, as governments remove capital controls and other barriers. Eight essays examine such issues as the current extent of international market integration, gains to U.S. investors through international diversification, home-country bias in investing, the role of time and location around the world in stock trading, and the behavior of country funds. Other, long-standing questions about equity markets are also addressed, including market efficiency and the accuracy of models of expected returns, with a particular focus on variances, covariances, and the price of risk according to the Capital Asset Pricing Model.
Book Synopsis How Does Investor Sentiment Have Impacts on Stock Returns and Volatility in the Growth Enterprise Market in China? by : Jinshi Zheng
Download or read book How Does Investor Sentiment Have Impacts on Stock Returns and Volatility in the Growth Enterprise Market in China? written by Jinshi Zheng and published by . This book was released on 2020 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation mainly explores the effect of investor sentiment on stock returns and volatility on Growth Enterprise in China using monthly data from Shenzhen Stock Exchange of China from June 2010 to November 2019. Using five explicit and market-related implicit indicators an investor sentiment has been measured and constructed with the help of principal component analysis. The analysis has been done by employing a vector autoregression(VAR) model and impulse response functions (IRFs) generated from a VAR model to examine the relationship between the unanticipated changes in investor sentiment and stock returns and volatility. We also establish EGARCH model to test the validity of previous results and if the asymmetric impact of positive and negative news on market returns volatility. The results show a significant impact of investor sentiment on stock return and volatility. We also document that there is a positive leverage effect between investor sentiment and the volatility of returns. The findings of this paper can help both individual and institutional investors have a better understanding of GEM market and improve their investment returns by incorporating investor sentiment into their asset forecasting model. This paper also provides policymakers guidance on reducing volatility on stock markets from the perspective of investor sentiment. Additionally, this paper has important contributions to behavioral finance and adds to the limited number of studies on investor sentiment and stock return in not only the Chinese market but emerging markets.
Book Synopsis Relationship Between Individual Investor Sentiment with Its Volatility and Returns of Small-Cap Stocks by : Qin Yong
Download or read book Relationship Between Individual Investor Sentiment with Its Volatility and Returns of Small-Cap Stocks written by Qin Yong and published by . This book was released on 2015 with total page 12 pages. Available in PDF, EPUB and Kindle. Book excerpt: Due to the irrational behavior of individual investors have a significant impact on the stock market, and Chinese stock market with inexperienced individual investors as the main body, our individual investor sentiment may play a more important role than in Western countries in the stock trading process. Therefore, this paper use ARMA-GARCH model to examine the relationship between the investor sentiment along its volatility and the small-cap stocks, which are individually described by newly opened stock trading accounts and the CSI 500. The results show that: The individual investor behavior exhibits a short-term ARCH effects and small-cap stocks exhibit short-term gain inertia; the high number of newly opened stock trading accounts responses to high small-cap stocks yields and display a "spillover effect" to market return; using newly opened stock trading accounts as individual investor sentiment index has great explanatory power to small-cap stocks in China.
Book Synopsis Investor Sentiment in the Stock Market by : Malcolm P. Baker
Download or read book Investor Sentiment in the Stock Market written by Malcolm P. Baker and published by . This book was released on 2007 with total page 30 pages. Available in PDF, EPUB and Kindle. Book excerpt: "Real investors and markets are too complicated to be neatly summarized by a few selected biases and trading frictions. The "top down" approach to behavioral finance focuses on the measurement of reduced form, aggregate sentiment and traces its effects to stock returns. It builds on the two broader and more irrefutable assumptions of behavioral finance -- sentiment and the limits to arbitrage -- to explain which stocks are likely to be most affected by sentiment. In particular, stocks of low capitalization, younger, unprofitable, high volatility, non-dividend paying, growth companies, or stocks of firms in financial distress, are likely to be disproportionately sensitive to broad waves of investor sentiment. We review the theoretical and empirical evidence for these predictions."--abstract.
Book Synopsis Beast on Wall Street by : Robert A. Haugen
Download or read book Beast on Wall Street written by Robert A. Haugen and published by Pearson. This book was released on 1999 with total page 170 pages. Available in PDF, EPUB and Kindle. Book excerpt: It is now abundantly clear that stock volatility is a contagious disease that spreads virulently from market to market around the world. Price changes in one market drive subsequent price changes in that market as well as in others. In Beast, Haugen makes a compelling case for the fact that even under normal conditions, fully 80 percent of stock volatility is price driven. Moreover, this volatility is far from benign. It acts to reduce the level of investment spending and constitutes a significant and permanent drag on economic growth. Price-driven volatility is unstable. Dramatic and unpredictable explosions in price-driven volatility can send stock markets in a downward spiral and cause significant disruptions in economic activity. Haugen argues that this indeed happened in 1929 and 1930. If volatility in Asian markets persists, it can easily become the source of the problem rather than merely a symptom.
Book Synopsis Inefficient Markets by : Andrei Shleifer
Download or read book Inefficient Markets written by Andrei Shleifer and published by OUP Oxford. This book was released on 2000-03-09 with total page 225 pages. Available in PDF, EPUB and Kindle. Book excerpt: The efficient markets hypothesis has been the central proposition in finance for nearly thirty years. It states that securities prices in financial markets must equal fundamental values, either because all investors are rational or because arbitrage eliminates pricing anomalies. This book describes an alternative approach to the study of financial markets: behavioral finance. This approach starts with an observation that the assumptions of investor rationality and perfect arbitrage are overwhelmingly contradicted by both psychological and institutional evidence. In actual financial markets, less than fully rational investors trade against arbitrageurs whose resources are limited by risk aversion, short horizons, and agency problems. The book presents and empirically evaluates models of such inefficient markets. Behavioral finance models both explain the available financial data better than does the efficient markets hypothesis and generate new empirical predictions. These models can account for such anomalies as the superior performance of value stocks, the closed end fund puzzle, the high returns on stocks included in market indices, the persistence of stock price bubbles, and even the collapse of several well-known hedge funds in 1998. By summarizing and expanding the research in behavioral finance, the book builds a new theoretical and empirical foundation for the economic analysis of real-world markets.
Book Synopsis Three Essays on Information, Volatility, and Crises in Equity Markets by : Shane K. Clark
Download or read book Three Essays on Information, Volatility, and Crises in Equity Markets written by Shane K. Clark and published by . This book was released on 2015 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Essay 3 investigates the relation between proxies for investor sentiment and stock market crises and recoveries on international indices. Using an Early-Warning-System (EWS) model, the essay examines whether investor sentiment is a useful predictor for the occurrence of stock market crises and early signs of recovery. Three alternative proxies are used to measure investor sentiment, including previously cited measures of stock market riskiness, investors' risk aversion and investors' optimism about stock markets. The results show that investor sentiment is overall a significant predictor of the occurrence of crises within a one year period, and that the addition of sentiment into early warning signal models of stock market crises can improve the predictive performance of the model (increases in investor sentiment increase the probability of occurrence of a crisis, which is in line with previous contributions finding a negative lead-lag relation between sentiment and stock returns). The extension of the model to early signs of recoveries also shows that sentiment is a reliable predictor. The measure of stock market riskiness (Baker and Wurgler, 2006) is found to be a better predictor than the Volatility Index (VIX) and the Put-to-Call Ratio (PCR). The cross-country comparison results confirms the literature findings that the link between sentiment and stock market returns varies across indices and cultures, as the predictive power of the variable appears strongest in the French and U.S. indices.
Book Synopsis Investor Sentiment in the Stock Market by : Malcolm P. Baker
Download or read book Investor Sentiment in the Stock Market written by Malcolm P. Baker and published by . This book was released on 2009 with total page 37 pages. Available in PDF, EPUB and Kindle. Book excerpt: Real investors and markets are too complicated to be neatly summarized by a few selected biases and trading frictions. The quot;top downquot; approach to behavioral finance focuses on the measurement of reduced form, aggregate sentiment and traces its effects to stock returns. It builds on the two broader and more irrefutable assumptions of behavioral finance - sentiment and the limits to arbitrage - to explain which stocks are likely to be most affected by sentiment. In particular, stocks of low capitalization, younger, unprofitable, high volatility, non-dividend paying, growth companies, or stocks of firms in financial distress, are likely to be disproportionately sensitive to broad waves of investor sentiment. We review the theoretical and empirical evidence for these predictions.
Book Synopsis Investor Sentiment and Return Predictability of Economic Policy Uncertainty by : Zehui Wang
Download or read book Investor Sentiment and Return Predictability of Economic Policy Uncertainty written by Zehui Wang and published by . This book was released on 2018 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Both economic policy uncertainty (EPU) innovation and investor sentiment affect stock market returns. However, their relative importance is typically examined separately in the finance literature. This study concentrates on examining how different investor sentiment regimes affect the relationship of EPU innovation and future stock market returns. Using the Baker et al. (2016) news-based measure to capture the changes in EPU in the United States and an indirect market-based index (Baker and Wurgler, 2006) as a proxy for different sentiment regimes, we find that EPU innovation is negatively correlated with future stock market returns. The negative predictive ability of changes in EPU on future stock returns is only significant under a high-sentiment regime. After adding the lagged business cycle and market volatility variables, the negative predictive ability of changes in EPU on future stock returns is still better under a high-sentiment regime than the negative predictive ability under a low-sentiment regime.
Book Synopsis Predicting Stock Market Returns and Volatility with Investor Sentiment by : Jerry C. Ho
Download or read book Predicting Stock Market Returns and Volatility with Investor Sentiment written by Jerry C. Ho and published by . This book was released on 2013 with total page 27 pages. Available in PDF, EPUB and Kindle. Book excerpt: We test the predictive ability of investor sentiment on the return and volatility at the aggregate market level in the U.S., four largest European countries and three Asia-Pacific countries. We find that in the U.S., France and Italy periods of high consumer confidence levels are followed by low market returns. In Japan both the level and the change in consumer confidence boost the market return in the next month. Further, shifts in sentiment significantly move conditional volatility in most of the countries, and in Italy such impacts lead to an increase in returns by 4.7% in the next month.
