Work

An Empirical Study of the Effect of Investor Sentiment on Returns of Different Industries

Year: 2014

Type: article

Abstract: Studies on investor sentiment are mostly focused on the stock market, but little attention has been paid to the effect of investor sentiment on the return of a specific industry. This paper constructs a proxy variable to examine the relationship between investor sentiment and the return of a specific industry, using the Principle Component Analysis, and finds that investor sentiment is positively correlated with the industry return of the current period and negatively correlated with that of one lag period; we classify investor sentiment as optimistic state and pessimistic state and find that optimistic investor sentiment has a positive effect on stock returns of most industries, while pessimistic investor sentiment has no effect on them; this paper further builds a two‐state Markov regime switching model and finds that sentiment has different effect on different industries returns on different states of market.

Source: Mathematical Problems in Engineering

DOI: 10.1155/2014/545723

Authors: Chuangxia Huang, Xin Yang, Xiaoguang Yang, Hu Sheng

Institutions: Chinese Academy of Sciences, Academy of Mathematics and Systems Science, Changsha University of Science and Technology, Central South University

Language: English

Topic: Financial Markets and Investment Strategies

Subfield: Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: hybrid

Estimated APC paid: $2,550

Funders: National Science Foundation, National Natural Science Foundation of China, Hunan Provincial Science and Technology Department