The Predictability of Consumer Sentiment on Stock Returns

• Main Authors: Chen-Ing Lee, 李呈穎
• Other Authors: Keng-Yu Ho
• Format: Others
• Language: en_US
• Published: 2005
• Online Access: http://ndltd.ncl.edu.tw/handle/68662892825930744736

碩士 === 國立中央大學 === 財務金融研究所 === 93 === Whether investor sentiment has any bearing on asset returns has long been a topic of interest in finance. This paper studies the relationship between changes in sentiment as measured by changes in the University of Michigan consumer sentiment index on stock market and different industry portfolios returns at one-month and one-year horizons over 1979-2000 and 1955-2000 period, respectively. We find that change in consumer sentiment reliably predict most industries both on monthly and yearly basis. In addition, the effect of consumer sentiment on industries differs between economic expansion and recession period. We find that the change of the consumer sentiment index has better predictability in the economic recession than in the economic expansion.