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A new European investor sentiment index (EURsent) and its return and volatility predictability

2020-07Journal article Restricted access
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dc.contributor.authorReis, Pedro Manuel Nogueira
dc.contributor.authorPinho, Carlos
dc.date.accessioned2020-07-27T15:07:53Z
dc.date.available2020-07-27T15:07:53Z
dc.date.issued2020-07
dc.description.abstractThis study presents a new European investor sentiment index, EURsent, based on new individual sentiment proxies such as VSTOXX, gold, and the German bond yield spread, and studies the spillover and contagion between the United States and Europe. Furthermore, it analyses the simultaneous influence of this new sentiment measure index on both volatility and stock returns, including causality. Applying well-established statistical techniques, such as principal component analysis, ordinary least squares, autoregressive conditional heteroskedasticity (ARCH), generalized ARCH (GARCH), and threshold GARCH models, the findings demonstrate how EURsent is closely interrelated with the most universally recognized sentiment index in academia, demonstrating strong co-movement between the US and European stock markets, mainly prior to the global subprime crisis. The study also applies vector autoregressive modelling and OOS analysis that allows one to conclude that EURsent is a strong predictor of market returns, through the discount rate and cash flow news, although the latter is the most relevant channel. This study creates a truly representative measure of global European investor sentiment that is comparable to that created by Baker and Wurgler for the United States, interlinking a holistic sentiment measure index, sustained on new single investor sentiment proxies, with conditionally market volatility and market returns, suggesting causality. EURsent could thus be a tool for investment managers, investors, and financial service providers as well as regulators to monitor the evolution of stock markets.pt_PT
dc.description.versioninfo:eu-repo/semantics/publishedVersionpt_PT
dc.identifier.citationReis, P.M.N., Pinho, C. (2020). A new European investor sentiment index (EURsent) and its return and volatility predictability, Journal of Behavioral and Experimental Finance, Vol. (27), September 2020, 100373-100386pt_PT
dc.identifier.doi10.1016/j.jbef.2020.100373pt_PT
dc.identifier.urihttp://hdl.handle.net/10400.19/6337
dc.language.isoengpt_PT
dc.peerreviewedyespt_PT
dc.publisherElsevierpt_PT
dc.relationThis work is funded by National Funds through the FCT - Founda-tion for Science and Technology, I.P., within the scope of the project Refa UIDB/058583/202pt_PT
dc.relation.publisherversionhttps://www.sciencedirect.com/science/article/pii/S2214635019303041?dgcid=authorpt_PT
dc.subjectInvestor sentimentpt_PT
dc.subjectSentiment indexpt_PT
dc.subjectContagionpt_PT
dc.subjectSpilloverpt_PT
dc.subjectMarket volatilitypt_PT
dc.subjectMarket returnspt_PT
dc.titleA new European investor sentiment index (EURsent) and its return and volatility predictabilitypt_PT
dc.typejournal article
dspace.entity.typePublication
oaire.citation.conferencePlaceUSApt_PT
oaire.citation.endPage100386pt_PT
oaire.citation.startPage100373pt_PT
oaire.citation.titleJournal of Behavioral and Experimental Financept_PT
oaire.citation.volume27pt_PT
rcaap.rightsrestrictedAccesspt_PT
rcaap.typearticlept_PT

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