Herculano, M. C. and Lütkebohmert, E. (2023) Investor sentiment and global economic conditions. Journal of Empirical Finance, 73, pp. 134-152. (doi: 10.1016/j.jempfin.2023.06.001)
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Abstract
The paper examines the macroeconomic relevance of the common component of discount rate news in firm-level stock returns for G7 countries (except for Italy, focusing on each country’s index constituents) by applying a hierarchical dynamic factor model to the Campbell and Ammer (1993) return decomposition. This approach offers advantages over alternative investor sentiment indicators and is easily extended to a larger cross-section of countries. Evidence suggests global investor sentiment leads, rather than lags, domestic sentiment and global economic conditions. Investor sentiment predicts economic conditions in-sample and out-of-sample.
| Item Type: | Articles |
|---|---|
| Status: | Published |
| Refereed: | Yes |
| Glasgow Author(s) Enlighten ID: | Colburn Herculano, Mr Miguel |
| Authors: | Herculano, M. C., and Lütkebohmert, E. |
| College/School: | College of Social Sciences > Adam Smith Business School > Economics |
| Journal Name: | Journal of Empirical Finance |
| Publisher: | Elsevier |
| ISSN: | 0927-5398 |
| ISSN (Online): | 1879-1727 |
| Published Online: | 12 June 2023 |
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