Bidirectional relationship between investor sentiment and excess returns: New evidence from the wavelet perspective

Arbeitspapier

This paper sheds new light on the mutual relationship between investor sentiment and excess returns corresponding to the bubble component of stock prices. We propose to use the wavelet concept of the phase angle to determine the lead-lag relation between these variables. The wavelet phase angle allows for decoupling short- and long-run relations and is additionally capable of identifying time-varying comovement patterns. By applying this concept to excess returns of the monthly S&P500 index and two alternative monthly US sentiment indicators we find that in the short run (until 3 months) sentiment is leading returns whereas for periods above 3 months the opposite can be observed.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Hohenheim Discussion Papers in Business, Economics and Social Sciences ; No. 06-2015

Classification and Topics

• Classification: Wirtschaft ; Portfolio Choice; Investment Decisions ; Information and Market Efficiency; Event Studies; Insider Trading ; Single Equation Models; Single Variables: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes ; Multiple or Simultaneous Equation Models: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
• Subject: wavelet phase angle ; wavelet analysis ; sentiment indicator ; excess returns ; speculative bubble ; stock market

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Marczak, Martyna ; Beissinger, Thomas
• Event: Veröffentlichung
• (who): Universität Hohenheim, Fakultät Wirtschafts- und Sozialwissenschaften
• (where): Stuttgart
• (when): 2015

Further information

• Handle: http://hdl.handle.net/10419/117331
• URN: urn:nbn:de:bsz:100-opus-11037
• Last update: 10.03.2025, 11:41 AM CET