The Relationship between Market Sentiment Index and Stock Rates of Return: a Panel Data Analysis
This article analyzes the relationship between market sentiment and future stock rates of return. We used amethodology based on principal component analysis to create a sentiment index for the Brazilian market withdata from 1999 to 2008. The sample consisted of companies listed on BM&FBOVESPA wh...
| Main Authors: | , |
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| Format: | Article |
| Language: | English |
| Published: |
Associação Nacional de Pós-Graduação e Pesquisa em Administração (ANPAD)
2012-04-01
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| Series: | BAR: Brazilian Administration Review |
| Subjects: | |
| Online Access: | http://www.anpad.org.br/periodicos/arq_pdf/a_1301.pdf |
| _version_ | 1797966994543214592 |
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| author | Claudia Emiko Yoshinaga Francisco Henrique Figueiredo de Castro Junior |
| author_facet | Claudia Emiko Yoshinaga Francisco Henrique Figueiredo de Castro Junior |
| author_sort | Claudia Emiko Yoshinaga |
| collection | DOAJ |
| description | This article analyzes the relationship between market sentiment and future stock rates of return. We used amethodology based on principal component analysis to create a sentiment index for the Brazilian market withdata from 1999 to 2008. The sample consisted of companies listed on BM&FBOVESPA which were groupedinto quintiles, each representing a portfolio, according to the magnitude of the following characteristics: marketvalue, total annualized risk and listing time on BM&FBOVESPA. Next, we calculated the average return of eachportfolio for every quarter. The data for the first and last quintiles were analyzed via two-factor ANOVA, usingsentiment index of the previous period (positive or negative) as the main factor and each characteristic ascontrolling factors. Finally, the sentiment index was included in a panel data pricing model. The results indicatea significant and negative relationship between the market sentiment index and the future rates of return. Thesefindings suggest the existence of a reversion pattern in stock returns, meaning that after a positive sentimentperiod, the impact on subsequent stock returns is negative, and vice-versa. |
| first_indexed | 2024-04-11T02:24:09Z |
| format | Article |
| id | doaj.art-d4db91a5e1ee4332817d4a3384ca16f4 |
| institution | Directory Open Access Journal |
| issn | 1807-7692 |
| language | English |
| last_indexed | 2024-04-11T02:24:09Z |
| publishDate | 2012-04-01 |
| publisher | Associação Nacional de Pós-Graduação e Pesquisa em Administração (ANPAD) |
| record_format | Article |
| series | BAR: Brazilian Administration Review |
| spelling | doaj.art-d4db91a5e1ee4332817d4a3384ca16f42023-01-02T23:03:42ZengAssociação Nacional de Pós-Graduação e Pesquisa em Administração (ANPAD)BAR: Brazilian Administration Review1807-76922012-04-0192189210The Relationship between Market Sentiment Index and Stock Rates of Return: a Panel Data AnalysisClaudia Emiko YoshinagaFrancisco Henrique Figueiredo de Castro JuniorThis article analyzes the relationship between market sentiment and future stock rates of return. We used amethodology based on principal component analysis to create a sentiment index for the Brazilian market withdata from 1999 to 2008. The sample consisted of companies listed on BM&FBOVESPA which were groupedinto quintiles, each representing a portfolio, according to the magnitude of the following characteristics: marketvalue, total annualized risk and listing time on BM&FBOVESPA. Next, we calculated the average return of eachportfolio for every quarter. The data for the first and last quintiles were analyzed via two-factor ANOVA, usingsentiment index of the previous period (positive or negative) as the main factor and each characteristic ascontrolling factors. Finally, the sentiment index was included in a panel data pricing model. The results indicatea significant and negative relationship between the market sentiment index and the future rates of return. Thesefindings suggest the existence of a reversion pattern in stock returns, meaning that after a positive sentimentperiod, the impact on subsequent stock returns is negative, and vice-versa.http://www.anpad.org.br/periodicos/arq_pdf/a_1301.pdfsentiment indexpricing modelGMM panel data. |
| spellingShingle | Claudia Emiko Yoshinaga Francisco Henrique Figueiredo de Castro Junior The Relationship between Market Sentiment Index and Stock Rates of Return: a Panel Data Analysis BAR: Brazilian Administration Review sentiment index pricing model GMM panel data. |
| title | The Relationship between Market Sentiment Index and Stock Rates of Return: a Panel Data Analysis |
| title_full | The Relationship between Market Sentiment Index and Stock Rates of Return: a Panel Data Analysis |
| title_fullStr | The Relationship between Market Sentiment Index and Stock Rates of Return: a Panel Data Analysis |
| title_full_unstemmed | The Relationship between Market Sentiment Index and Stock Rates of Return: a Panel Data Analysis |
| title_short | The Relationship between Market Sentiment Index and Stock Rates of Return: a Panel Data Analysis |
| title_sort | relationship between market sentiment index and stock rates of return a panel data analysis |
| topic | sentiment index pricing model GMM panel data. |
| url | http://www.anpad.org.br/periodicos/arq_pdf/a_1301.pdf |
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