TACTICAL ASSET ALLOCATION USING INVESTORS' SENTIMENT

Soo-Hyun Kim and Hyoung-Goo Kang

Hitotsubashi Journal of Economics, 2015, vol. 56, issue 2, 177-195

Abstract: We extend investor sentiment literature and apply it to tactical portfolio allocation in the Korean stock market. We first construct a Korean investors' sentiment index by considering prior literature and expert opinions. Second, we investigate whether the index can predict both time series and cross sectional variations of stock returns. Third, we attempt tactical asset allocation using the index. Our sentiment index predicts both time series and cross sectional variations of stock returns. In addition, the tactical asset allocation generates significant excess return after adjusting risks and transaction costs.

Keywords: investor sentiment; tactical asset allocation; Korean stock market; alpha (search for similar items in EconPapers)
JEL-codes: G02 G11 G12 (search for similar items in EconPapers)
Date: 2015
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Persistent link: https://EconPapers.repec.org/RePEc:hit:hitjec:v:56:y:2015:i:2:p:177-195

DOI: 10.15057/27601

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