Chinese institutional investors’ sentiment


Kling, Gerhard and Gao, Lei (2008) Chinese institutional investors’ sentiment. Journal of International Financial Markets, Institutions & Money , 18, (4), 374-387. (doi:10.1016/j.intfin.2007.04.002).

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Description/Abstract

We use daily survey data on Chinese institutional investors’ forecasts to measure investors' sentiment. Our empirical model uncovers that share prices and investor sentiment do not have a long-run relation; however, in the short-run, the mood of investors follows a positive feedback process. Hence, institutional investors are optimistic when previous market returns were positive. Contrarily, negative returns trigger a decline in sentiment, which reacts more sensitively to negative than positive returns. Investor sentiment does not predict future market movements – but a drop in confidence increases market volatility and destabilizes exchanges. EGARCH models reveal asymmetric responses in the volatility of investor sentiment; however, Granger causality tests reject volatility-spillovers between returns and sentiment.

Item Type: Article
ISSNs: 1042-4431 (print)
1873-0612 (electronic)
Subjects: H Social Sciences > HG Finance
Divisions: University Structure - Pre August 2011 > School of Management
ePrint ID: 164955
Date Deposited: 07 Oct 2010 13:28
Last Modified: 27 Mar 2014 19:18
URI: http://eprints.soton.ac.uk/id/eprint/164955

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