Chinese institutional investors’ sentiment
Chinese institutional investors’ sentiment
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.
374-387
Kling, Gerhard
feea1f9e-c49a-4d9c-b688-ec839cef9624
Gao, Lei
885f6f80-3796-4bdb-b75d-7c8905b6b5de
October 2008
Kling, Gerhard
feea1f9e-c49a-4d9c-b688-ec839cef9624
Gao, Lei
885f6f80-3796-4bdb-b75d-7c8905b6b5de
Kling, Gerhard and Gao, Lei
(2008)
Chinese institutional investors’ sentiment.
Journal of International Financial Markets, Institutions and Money, 18 (4), .
(doi:10.1016/j.intfin.2007.04.002).
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.
Text
Sentiment.doc
- Author's Original
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e-pub ahead of print date: 10 April 2007
Published date: October 2008
Organisations:
Management
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Local EPrints ID: 164955
URI: http://eprints.soton.ac.uk/id/eprint/164955
ISSN: 1042-4431
PURE UUID: 95e2ab08-635d-4a6e-93d3-fe33557808a5
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Date deposited: 07 Oct 2010 13:28
Last modified: 14 Mar 2024 02:09
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Author:
Gerhard Kling
Author:
Lei Gao
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