Individual Investor Sentiment and Stock Returns - What Do We Learn from Warrant Traders?

Philipp Schmitz (), Markus Glaser () and Martin Weber
Additional contact information
Philipp Schmitz: Lehrstuhl für ABWL, Finanzwirtschaft, insb. Bankbetriebslehre, Postal: L 5, 2, D-68131 Mannheim
Markus Glaser: Sonderforschungsbereich 504, Postal: L 13, 15, D-68131 Mannheim

No 06-12, Sonderforschungsbereich 504 Publications from Sonderforschungsbereich 504, Universität Mannheim, Sonderforschungsbereich 504, University of Mannheim

Abstract: In this paper, we propose a measure of individual investor sentiment that is derived from the market for bank-issued warrants. Due to a unique warrant transaction data set from a large discount broker we are able to calculate a daily sentiment measure and test whether individual investor sentiment is related to daily stock returns by using vector autoregressive models and Granger causality tests. We find that there exists a mutual influence of sentiment and stock market returns, but only in the very short-run (one and two trading days). Returns have a negative influence on sentiment, while the influence of sentiment on returns is positive for the next trading day. The influence of stock market returns on sentiment is stronger than vice versa. Our sentiment measure simultaneously avoids problems that are associated with existing sentiment measures, which are based on the closed-end fund discount, stock market transactions, the put-call ratio or investor surveys.

Pages: 47 pages
Date: 2006-10-05
New Economics Papers: this item is included in nep-cbe, nep-fmk and nep-rmg
Note: We would like to thank Anders Anderson, Christian Klein, Alexander Klos, Michael Meffert, seminar participants at the
References: View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://www.sfb504.uni-mannheim.de/publications/dp06-12.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 500 Can't connect to www.sfb504.uni-mannheim.de:80 (No such host is known. )

Related works:
Working Paper: Individual investor sentiment and stock returns - what do we learn from warrant traders? (2006)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:xrs:sfbmaa:06-12

Ordering information: This working paper can be ordered from

Access Statistics for this paper

More papers in Sonderforschungsbereich 504 Publications from Sonderforschungsbereich 504, Universität Mannheim Contact information at EDIRC., Sonderforschungsbereich 504, University of Mannheim
Bibliographic data for series maintained by Carsten Schmidt ( this e-mail address is bad, please contact ).