Construction of Sentiment Index and the Relationship between Sentiment Index and TAIEX Return

• Main Authors: Wu, Pei Jung, 吳佩蓉
• Other Authors: Kuo, Wei Yu
• Format: Others
• Language: en_US
• Online Access: http://ndltd.ncl.edu.tw/handle/51039138307471043911

碩士 === 國立政治大學 === 國際經營與貿易研究所 === 99 === The main contribution would be the construction of the sentiment index in Taiwan stock markets and examining the relationship between the variation of the sentiment index and Taiwan stock market returns. The background is Taiwan stock markets. The sample period is from January 2001 to December 2010. We use the method in Baker, Wurgler and Yuan (2009) to measure investors’ sentiment and explore the relationship between the variation of the sentiment index and Taiwan stock market returns. The empirical result reveals that in monthly data, Taiwan stock market returns is the leading indicator of the variation of investment sentiment. In a longer term, we mean the quarterly data in this paper, the situation changes. In quarterly data, the variation of the investment sentiment is the leading indicator of the Taiwan stock market returns. In addition, instead of a negative correlation between the stock market returns and our sentiment index, we prove that our sentiment index have a positive impact on stock market returns. Therefore, we could not use this sentiment index to forecast future economic bubbles.