Global, Local, and Contagious Investor Sentiment

2009

450 citations recorded by the source corpus.

We construct investor sentiment indices for six major stock markets and decompose them into one global and six local indices. In a validation test, we find that relative sentiment is correlated with the relative prices of dual-listed companies. Global sentiment is a contrarian predictor of country-level returns. Both global and local sentiment are contrarian predictors of the time-series of cross-sectional returns within markets: When sentiment is high, future returns are low on relatively difficult to arbitrage and difficult to value stocks. Private capital flows appear to be one mechanism by which sentiment spreads across markets and forms global sentiment.

Subfields: Economics and Econometrics, Finance, Management Science and Operations Research

View Paper: https://www.semanticscholar.org/paper/c02b590e43edf55cf0c3f6bf32791b3eda03c911

Citations in the corpus

• Investor sentiment, trading behavior and stock returns (2017, unknown): “…provide empirical evidence that the sentiment and trading behaviour of market participants can significantly affect asset returns in real-world financial markets (Baker and Wurgler 2006, 2007; Baker, Wurgler, and Yuan 2012; Brown and Cliff 2004; Greenwood and Shleifer 2014; Kim, Ryu, and Seo 2014).”
• How Does Investor Sentiment Affect Stock Market Crises? Evidence from Panel Data (2011, unknown): “Similarly, Baker, Wurgler and Yuan (2009) constructed indexes of investor sentiment for six major stock markets and decomposed them into one global and six local indices.”
• Arbitrage Asymmetry and the Idiosyncratic Volatility Puzzle (2014, unknown): “…(2008), Kaniel, Saar, and Titman (2008), Frazzini and Lamont (2008), Livnat and Petrovic (2008), Antoniou, Doukas, and Subrahmanyam (2012), Baker, Wurgler, and Yuan (2012), Chung, Hung, and Yeh (2012), Shen and Yu (2012), and Stambaugh, Yu, and Yuan (2012a, 2012b). on a wide range of…”
• Measuring Investor Sentiment with Mutual Fund Flows (2012, unknown): “The R2 of the level regression is 0.054 and for the 22 Baker, Wurgler, and Yuan (2009) create sentiment indices, as in Baker and Wurgler (2006), in each of six countries and form a global index based on these six indices.”
• The COVID-19 Outbreak and Affected Countries Stock Markets Response (2020, unknown): “According to Bai [24] Baker, Wurgler, and Yuan [25] investors may feel pessimistic about investment prospects in a given market, selling off that market’s stocks under communicable disease outbreak.”
• The short of it (2012, unknown): “These anomalies reflect sorts on measures that include financial distress, (1)Studies addressing market-wide sentiment include Delong, Shleifer, Summers, and Waldman (1990), Shleifer and Summers (1990), Lee, Shleifer, and Thaler (1991), Barberis, Shleifer, and Vishny (1998), Shiller (2001), Brown an”
• Can Facebook Predict Stock Market Activity (2013, unknown): “(12)For the full list of negative and positive words, please see Pennebaker et al. (2007). (13)Positivity and negativity scores can be interpreted as optimism and pessimism factors, respectively.”