Optimism in Financial Markets: Stock Market Returns and Investor Sentiments

Chiara Limongi Concetto and Francesco Ravazzolo
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Chiara Limongi Concetto: Faculty of Economics and Management, Free University of Bozen-Bolzano, 39100 Bolzano, Italy

JRFM, 2019, vol. 12, issue 2, 1-14

Abstract: This paper investigates how investor sentiment affects stock market returns and evaluates the predictability power of sentiment indices on U.S. and EU stock market returns. As regards the American example, evidence shows that investor sentiment indices have an economic and statistical predictability power on stock market returns. Concerning the European market instead, investigation provides weak results. Moreover, comparing the two markets, where investor sentiment of U.S. market tries to predict the European stock market returns, and vice versa, the analyses indicate a spillover effect from the U.S. to Europe.

Keywords: Bayesian econometrics; portfolio choice; sentiments; stock market predictability (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

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Working Paper: Optimism in Financial Markets: Stock Market Returns and Investor Sentiments (2019)
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