Investor Sentiment Measures / Lily Qiu, Ivo Welch.

Format:

Book

Author/Creator:

Qiu, Lily.

Contributor:

National Bureau of Economic Research.

Welch, Ivo.

Series:

Working Paper Series (National Bureau of Economic Research) no. w10794.

NBER working paper series no. w10794

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2004.

Summary:

This paper compares investor sentiment measures based on consumer confidence surveys with measures extracted from the closed-end fund discount (CEFD). Our evidence suggests that these two kinds of sentiment measures do not correlate well with one another. For a short 2 - 4 year period in which we have direct investor sentiment survey data from UBS/Gallup, only the consumer confidence correlates well with investor sentiment. Further, only the consumer confidence based measure can robustly explain the small-firm return spread and the return spread between stocks held disproportionately by retail investors and those held by institutional investors. Surprisingly, there is even a hint that the consumer confidence measure can explain closed-end fund IPO activity, while the CEFD cannot. In sum, our evidence supports the view that sentiment plays a role in financial markets, but that the CEFD may be the wrong measure of sentiment.

Notes:

Print version record

September 2004.