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Is investor sentiment contagious? International sentiment and UK equity returns

Hudson, Yawen; Green, Christopher J.

Authors

Christopher J. Green



Abstract

This paper contributes to a growing body of literature studying investor sentiment. Separate sentiment measures for UK investors and UK institutional investors are constructed from commonly cited sentiment indicators using the first principle component method. We then examine if the sentiment measures can help predict UK equity returns, distinguishing between “turbulent” and “tranquil” periods in the financial markets. We find that sentiment tends to be a more important determinant of returns in the run-up to a crisis than at other times. We also examine if US investor sentiment can help predict UK equity returns, and find that US investor sentiment is highly significant in explaining the UK equity returns.

Journal Article Type Article
Publication Date 2015-03
Journal Journal of Behavioral and Experimental Finance
Print ISSN 2214-6350
Electronic ISSN 2214-6369
Peer Reviewed Peer Reviewed
Volume 5
Pages 46-59
APA6 Citation Hudson, Y., & Green, C. J. (2015). Is investor sentiment contagious? International sentiment and UK equity returns. Journal of behavioral and experimental finance, 5, 46-59. https://doi.org/10.1016/j.jbef.2015.02.004
DOI https://doi.org/10.1016/j.jbef.2015.02.004
Keywords Investor sentiment; Contagion; Institutional investors; Equity returns
Publisher URL https://www.sciencedirect.com/science/article/pii/S2214635015000064?via%3Dihub


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