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Chinese institutional investors’ sentiment

Record type: Article

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.

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Citation

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

More information

e-pub ahead of print date: 10 April 2007
Published date: October 2008
Organisations: Management

Identifiers

Local EPrints ID: 164955
URI: http://eprints.soton.ac.uk/id/eprint/164955
ISSN: 1042-4431
PURE UUID: 95e2ab08-635d-4a6e-93d3-fe33557808a5

Catalogue record

Date deposited: 07 Oct 2010 13:28
Last modified: 18 Jul 2017 12:28

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Contributors

Author: Gerhard Kling
Author: Lei Gao

University divisions


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