Chinese institutional investors’ sentiment

Kling, Gerhard and Gao, Lei (2007) 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).


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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
Digital Object Identifier (DOI): doi:10.1016/j.intfin.2007.04.002
ISSNs: 1042-4431 (print)
ePrint ID: 164955
Date :
Date Event
10 April 2007e-pub ahead of print
October 2008Published
Date Deposited: 07 Oct 2010 13:28
Last Modified: 18 Apr 2017 03:41
Further Information:Google Scholar

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