The Asymmetric Effect of Investor Sentiment and Stock Returns

• Main Authors: Yun-Lun Huang, 黃韻倫
• Other Authors: Hsiu-Chuan Lee
• Format: Others
• Language: zh-TW
• Published: 2013
• Online Access: http://ndltd.ncl.edu.tw/handle/77354952180286207450

碩士 === 銘傳大學 === 財務金融學系碩士在職專班 === 101 === The study first usesprincipal component analysis to construct theindirect sentiment index.The indirect sentiment index is based on the common variation in seven underlying proxies for sentiment: TWSE share turnover rate, the equity share in new issues, the numbers of initial public offering the numbers of advancing/declining issues, the short sales ratio, the changes in margin trading, and the changes in short selling. This paper also uses consumer confidence index to measure the direct sentiment index and observe how investor sentiment affects the subsequent stock returns. In addition, the study identifies market states according to Taiwan''s CEPD monitoring indicatorand Markov-switching model to capturethe asymmetric effect of investor sentiment and stock returnsunder different market regimes. The empirical results show that investor sentiment has a significantlynegative effect on subsequent stock returns. Moreover, the impact of investor sentiment on subsequent market returns is stronger for pessimism of investor sentiment and investor sentiment under the bear market regime. The resultsshowthe negativity and asymmetric effect betweeninvestor sentiment and stock returns.