The linkage between aggregate investor sentiment and metal futures returns: A nonlinear approach

Yao Zheng

The Quarterly Review of Economics and Finance, 2015, vol. 58, issue C, 128-142

Abstract: This paper examines the relationship between aggregate stock market sentiment and metal futures returns. Overall, metal futures have higher returns when investor sentiment is pessimistic rather than optimistic. Further analysis indicates that metal futures returns exhibit asymmetric responses to positive and negative investor sentiment shocks. Temporary and reactive demand shocks and flight to quality concerns may partially explain this asymmetry. In addition, there exists a negative predictive relationship between investor sentiment and metal futures returns, which remains persistent even after controlling for liquidity and open interest. Moreover, this predictive effect of sentiment on metal futures returns is magnified when there is high conditional volatility.

Keywords: Metal futures; Investor sentiment; VAR-GARCH-M; Markov regime-switching (search for similar items in EconPapers)
JEL-codes: G11 G12 G13 G14 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (16)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:quaeco:v:58:y:2015:i:c:p:128-142

DOI: 10.1016/j.qref.2015.02.008

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