Stock salience and the asymmetric market effect of consumer sentiment news

Akhtar, Shumi; Faff, Robert W.; Oliver, Barry; Subrahmanyam, Avanidhar

doi:10.1016/j.jbankfin.2012.07.019

Cited by 65 publications

(49 citation statements)

References 33 publications

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“…Akhtar, Faff, Oliver, & Subrahmanyam (2012) find that a negative market effect occurs upon the release of unfavorable sentiment news; there is no market reaction for the counterpart favorable news.…”

Section: Prior Literature and Hypothesesmentioning

confidence: 87%

Do Experts in Financial Magazines Exhibit the Representativeness Heuristic? Evidence from Taiwan

Laih¹

2016

AFR

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This paper investigates the use of the representativeness heuristic and herding recommendation by experts in Taiwanese investment magazines. We reveal that high-performing experts exhibit less use of representativeness heuristics and more use of herding stock recommendations than poor performers do. Representativeness and herding recommendations increase when sentiments are pessimistic and during bull markets. In general, more representative stocks yield lower abnormal returns and higher return comovement. However, for high-performing experts, recommendations with some degree of representativeness have a higher abnormal return than do recommendations with no representativeness. In addition, stock return comovement caused by herding recommendations catches more market-level news than does stock return comovement that is caused by representativeness.

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Section: Prior Literature and Hypothesesmentioning

confidence: 87%

Do Experts in Financial Magazines Exhibit the Representativeness Heuristic? Evidence from Taiwan

Laih¹

2016

AFR

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“…Since the seminal paper of DeLong et al (1990), which defines 'noise trader sentiment' as the component of expectations about asset returns not warranted by fundamentals, many papers have been written on how to measure investor sentiment 5 and recently consumer confidence indices have started to be used as a proxy for it (e.g., Lemmon and Portniaguina, 2006;Kalotay et al, 2007;Barsky and Sims, 2012;Ho and Hung, 2009;Schmeling, 2009;Akhtar et al, 2011Akhtar et al, , 2012Hsu et al, 2011;Yu and Yan, 2011;Stambaugh et al, 2012;Zouaoui et al, 2011;Bathia andBredin, 2013 Coakley et al, 2013 DeLong et al (1990) postulate for investor sentiment, may be a more suitable approach.…”

Section: Brief Literature Reviewmentioning

confidence: 99%

“…Indeed, academic research confirms that consumer confidence indices (CCIs) have predictive power (Acemoglu and Scott, 1994;Carroll et al, 1994;Bram and Ludvigson, 1998). More recently, consumer confidence indices have also found their way into financial research where they have started to be used as a direct proxy for investor sentiment (Qiu and Welch, 2006;Kalotay et al, 2007;Akhtar et al, 2011Akhtar et al, , 2012Zouaoui et al, 2011;Bathia and Bredin, 2013;Coakley et al, 2013). This may be somewhat puzzling because while consumer confidence, and therefore indices measuring it, can be expected to be shaped by market fundamentals (Acemoglu and Scott, 1994;Poterba, 2000), investor sentiment, at least in the sense of DeLong et al (1990), represents the irrational part of the price creation process.…”

Section: Introductionmentioning

confidence: 99%

“…This is somewhat surprising given that the financial situation at a household level may depend both on economic conditions (e.g., employment prospects), and future stock market returns (if households invest in equity directly, or indirectly via retirement schemes). More recently, however, several papers analysing the short-term impact of CCIs on stock markets have been published (e.g., Kalotay et al, 2007;Ho and Hung, 2009;Akhtar et al, 2011Akhtar et al, , 2012Hsu et al, 2011). These papers are, in fact, interested in testing the impact of investor sentiment on stock market movements, however, by using CCIs as a direct proxy for investor sentiment they implicitly test for the explanatory power of CCIs on stock market movements.…”

Section: Introductionmentioning

confidence: 99%

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Consumer confidence indices and stock markets' meltdowns

Ferrer

Salaber²,

Zalewska

2014

The European Journal of Finance

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Consumer confidence indices (CCIs) are a closely monitored barometer of countries' economic health, and an informative forecasting tool. Using European and US data, we provide a case study of the two recent stock market meltdowns (the post-dotcom bubble correction of 2000-2002 and the 2007-2009 decline at the beginning of the financial crisis) to contribute to the discussion on their appropriateness as proxies for stock markets' investor sentiment. Investor sentiment should positively covary with stock market movements (DeLong et al., 1990), however, we find that the CCI-stock market relationship is not universally positive. We also do not find support for the information effect documented in previous literature, but identify a more subtle relationship between consumer expectations about future household finances and stock market fluctuations.

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“…The Index of Consumer Sentiment produced by the University of Michigan Survey Research Center is also utilized as a market sentiment indicator by some articles, for instance, Akhtar, Faff, Oliver, & Subrahmanyam (2012). We however do not involve this series in the current paper as it contains only one series of monthly data and does not separately provide the financial asset investors' extreme or modest emotions.…”

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confidence: 99%

The Interaction between Market Sentiments in the U.S. Financial Market and Global Equity Market

Dong¹,

Guo²

2014

IBR

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This paper adopts the volatility index and Baker-Wurgler index as the U.S. financial market sentiment measures. Using monthly data from June 1965 to December 2010, we identify the causal relationships between sentiment and the performance of global equity markets. We include 23 G20 market indices, 28 European indices, 25 Asia-Pacific indices, and 10 Americas indices, and employ Granger causality procedure to explore the linkages. We find that the international equity markets are not greatly affected by the U.S. financial market sentiment. The type of extreme sentiment, whether it is optimistic or pessimistic, is irrelevant to its influential power. The equity markets that are affected by the volatility index do not cluster in any region. In contrast, the majority of global equity markets can Granger cause the U.S. investor sentiments, with optimistic market atmosphere being more affected. The equity markets in the Americas and Europe are highly influential to the U.S. investors, compared to the Asian markets.

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Stock salience and the asymmetric market effect of consumer sentiment news

Cited by 65 publications

References 33 publications

Do Experts in Financial Magazines Exhibit the Representativeness Heuristic? Evidence from Taiwan

Do Experts in Financial Magazines Exhibit the Representativeness Heuristic? Evidence from Taiwan

Consumer confidence indices and stock markets' meltdowns

The Interaction between Market Sentiments in the U.S. Financial Market and Global Equity Market

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