Sentiment and sign predictability of stock returns

Harri Pönkä

MPRA Paper from University Library of Munich, Germany

Abstract: We explore the relationship between investor, consumer, and business sentiment and the direction of excess stock market returns in the US. Our findings indicate that measures of investor sentiment are useful predictors, even after controlling for the predictive ability of commonly used predictors of stock returns and for the effects of recession. Measures of consumer and business sentiment do not hold similar predictive ability. The findings hold both in- and out-of-sample.

Keywords: Equity return; Probit model; Sentiment variable; Sign predictability (search for similar items in EconPapers)
JEL-codes: C22 C58 G12 G17 (search for similar items in EconPapers)
Date: 2017-10-09
New Economics Papers: this item is included in nep-for
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Journal Article: Sentiment and sign predictability of stock returns (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:81861

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