Reassessing the Predictability of the Investor Sentiments on US Stocks: The Role of Uncertainty and Risks

References

• Abdelhédi-Zouch, M., M. B. Abbes, and Y. Boujelbène. 2015. “Volatility Spillover and Investor Sentiment: Subprime Crisis.” Asian Academy of Management Journal of Accounting & Finance 11 (2):83–101.
   Google Scholar
• Bai, J., and P. Perron. 2003. “Computation and Analysis of Multiple Structural Change Models.” Journal of Applied Econometrics 18 (1):1–22.
   Google Scholar
• Baker, M., and J. Wurgler. 2006. “Investor Sentiment and the Cross‐Section of Stock Returns.” The Journal of Finance 61 (4):1645–80. doi:10.1111/j.1540-6261.2006.00885.x
   Web of Science ®Google Scholar
• Balcilar, M., R. Gupta, and C. Kyei. 2018. “Predicting Stock Returns and Volatility with Investor Sentiment Indices: A Reconsideration Using a Nonparametric Causality‐in‐Quantiles Test.” Bulletin of Economic Research 70 (1):74–87. doi:10.1111/boer.12119
   Web of Science ®Google Scholar
• Banchit, A., S. Abidin, S. Lim, and F. Morni. 2020. “Investor Sentiment, Portfolio Returns, and Macroeconomic Variables.” Journal of Risk and Financial Management 13 (11):259. ‏ doi:10.3390/jrfm13110259
   Web of Science ®Google Scholar
• Barberis, N., A. Shleifer, and R. Vishny. 1998. “A Model of Investor Sentiment.” Journal of Financial Economics 49 (3):307–43. doi:10.1016/S0304-405X(98)00027-0
   Web of Science ®Google Scholar
• Bauer, M. D., and J. D. Hamilton. 2018. “Robust Bond Risk Premia.” The Review of Financial Studies 31 (2):399–448.
   Google Scholar
• Beer, F., and M. Zouaoui. 2012. “Measuring Stock Market Investor Sentiment.” Journal of Applied Business Research (JABR) 29 (1):51–68. doi:10.19030/jabr.v29i1.7555
   Google Scholar
• Bekiros, S., R. Gupta, and C. Kyei. 2016. “A Non-Linear Approach for Predicting Stock Returns and Volatility with the Use of Investor Sentiment Indices.” Applied Economics 48 (31):2895–8. doi:10.1080/00036846.2015.1130793
   Web of Science ®Google Scholar
• Bliemel, F. 1973. “Theil's Forecast Accuracy Coefficient: A Clarification.” ‏ Journal of Marketing Research 10 (4):444–6. doi:10.1177/002224377301000413
   Web of Science ®Google Scholar
• Brown, G. W., and M. T. Cliff. 2004. “Investor Sentiment and the near-Term Stock Market.” Journal of Empirical Finance 11 (1):1–27. doi:10.1016/j.jempfin.2002.12.001
   Google Scholar
• Brown, G. W., and M. T. Cliff. 2005. “Investor Sentiment and Asset Valuation.” The Journal of Business 78 (2):405–40. doi:10.1086/427633
   Web of Science ®Google Scholar
• Chen, M. P., P. F. Chen, and C. C. Lee. 2013. “Asymmetric Effects of Investor Sentiment on Industry Stock Returns: Panel Data Evidence.” Emerging Markets Review 14:35–54. ‏ doi:10.1016/j.ememar.2012.11.001
   Web of Science ®Google Scholar
• Chi, L., X. Zhuang, and D. Song. 2012. “Investor Sentiment in the Chinese Stock Market: An Empirical Analysis.” Applied Economics Letters 19 (4):345–8. doi:10.1080/13504851.2011.577003
   Web of Science ®Google Scholar
• Chu, X., C. Wu, and J. Qiu. 2016. “A Non-Linear Granger Causality Test between Stock Returns and Investor Sentiment for Chinese Stock Market: A Wavelet-Based Approach.” Applied Economics 48 (21):1915–24. doi:10.1080/00036846.2015.1109048
   Web of Science ®Google Scholar
• Chung, S. L., C. H. Hung, and C. Y. Yeh. 2012. “When Does Investor Sentiment Predict Stock Returns?” Journal of Empirical Finance 19 (2):217–40. doi:10.1016/j.jempfin.2012.01.002
   Web of Science ®Google Scholar
• Clark, T. E., and K. D. West. 2007. “Approximately Normal Tests for Equal Predictive Accuracy in Nested Models.” Journal of Econometrics 138 (1):291–311.
   Google Scholar
• Concetto, C. L., and F. Ravazzolo. 2019. “Optimism in Financial Markets: Stock Market Returns and Investor Sentiments.” Journal of Risk and Financial Management 12 (2):1–14.
   Web of Science ®Google Scholar
• Curatola, G., M. Donadelli, R. Kizys, and M. Riedel. 2016. “Investor Sentiment and Sectoral Stock Returns: Evidence from World Cup Games.” Finance Research Letters 17:267–74. doi:10.1016/j.frl.2016.03.023
   Web of Science ®Google Scholar
• Das, S. R., and M. Y. Chen. 2007. “Yahoo! for Amazon: Sentiment Extraction from Small Talk on the Web.” Management Science 53 (9):1375–88. doi:10.1287/mnsc.1070.0704
   Web of Science ®Google Scholar
• Dergiades, T. 2012. “Do Investors’ Sentiment Dynamics Affect Stock Returns? Evidence from the US Economy.” Economics Letters 116 (3):404–7. doi:10.1016/j.econlet.2012.04.018
   Web of Science ®Google Scholar
• Dong, H. 2014. “Asymmetric Investor Sentiment and Broker Sentiment Contagion in the US Equity Market.” International Journal of Economics and Finance 6 (11):160–72. doi:10.5539/ijef.v6n11p160
   Google Scholar
• Edelen, R. M., A. J. Marcus, and H. Tehranian. 2010. “Relative Sentiment and Stock Returns.” Financial Analysts Journal 66 (4):20–32. doi:10.2469/faj.v66.n4.2
   Web of Science ®Google Scholar
• Finter, P., A. Niessen-Ruenzi, and S. Ruenzi. 2012. “The Impact of Investor Sentiment on the German Stock Market.” Zeitschrift Für Betriebswirtschaft 82 (2):133–63. doi:10.1007/s11573-011-0536-x
   Google Scholar
• Fisher, K. L., and M. Statman. 2000. “Investor Sentiment and Stock Returns.” Financial Analysts Journal 56 (2):16–23. doi:10.2469/faj.v56.n2.2340
   Google Scholar
• Ftiti, Z., and S. Hadhri. 2019. “Can Economic Policy Uncertainty, Oil Prices, and Investor Sentiment Predict Islamic Stock Returns? A Multi-Scale Perspective.” Pacific-Basin Finance Journal 53:40–55. ‏ doi:10.1016/j.pacfin.2018.09.005
   Web of Science ®Google Scholar
• Gebka, B. 2014. “The Non-Linear and Linear Impact of Investor Sentiment on Stock Returns: An Empirical Analysis of the US Market.” In Recent Advances in Estimating Non-Linear Models, edited by J. Ma, and M. Wohar, 281–99. New York, NY: Springer.
   Google Scholar
• Greenwood, R., and A. Shleifer. 2014. “Expectations of Returns and Expected Returns.” Review of Financial Studies 27 (3):714–46. doi:10.1093/rfs/hht082
   Web of Science ®Google Scholar
• Hammami, Y., and J. Zhu. 2020. “Understanding Time-Varying Short-Horizon Predictability.” Finance Research Letters 32:101097. ‏ doi:10.1016/j.frl.2019.01.009
   Web of Science ®Google Scholar
• Huang, D., F. Jiang, J. Tu, and G. Zhou. 2015. “Investor Sentiment Aligned: A Powerful Predictor of Stock Returns.” Review of Financial Studies 28 (3):791–837. doi:10.1093/rfs/hhu080
   Web of Science ®Google Scholar
• Isah, K. O., and I. D. Raheem. 2019. “The Hidden Predictive Power of Cryptocurrencies and QE: Evidence from US Stock Market.” Physica A: Statistical Mechanics and its Applications 536:121032.
   Google Scholar
• Jiang, Y., B. Mo, and H. Nie. 2018. “Does Investor Sentiment Dynamically Impact Stock Returns from Different Investor Horizons? Evidence from the US Stock Market Using a Multi-Scale Method.” Applied Economics Letters 25 (7):472–6. doi:10.1080/13504851.2017.1340558
   Web of Science ®Google Scholar
• Kambouroudis, D. S., and D. G. McMillan. 2015. “Is There an Ideal in-Sample Length for Forecasting Volatility?” Journal of International Financial Markets, Institutions and Money 37:114–37. doi:10.1016/j.intfin.2015.02.006
   Web of Science ®Google Scholar
• Khan, M. A., J. A. Hernandez, and S. J. H. Shahzad. 2020. “Time and Frequency Relationship between Household Investors’ Sentiment Index and US Industry Stock Returns.” Finance Research Letters 36:101318. doi:10.1016/j.frl.2019.101318
   Web of Science ®Google Scholar
• Kim, S. H., and D. Kim. 2014. “Investor Sentiment from Internet Message Postings and the Predictability of Stock Returns.” Journal of Economic Behavior & Organization 107:708–29. doi:10.1016/j.jebo.2014.04.015
   Web of Science ®Google Scholar
• Kling, G., and L. Gao. 2008. “Chinese Institutional Investors’ Sentiment.” Journal of International Financial Markets, Institutions and Money 18 (4):374–87. doi:10.1016/j.intfin.2007.04.002
   Google Scholar
• Kumari, J., and J. Mahakud. 2015. “Does Investor Sentiment Predict the Asset Volatility? Evidence from Emerging Stock Market India.” Journal of Behavioral and Experimental Finance 8:25–39. doi:10.1016/j.jbef.2015.10.001
   Web of Science ®Google Scholar
• Lao, J., H. Nie, and Y. Jiang. 2018. “Revisiting the Investor Sentiment–Stock Returns Relationship: A Multi-Scale Perspective Using Wavelets.” Physica A: Statistical Mechanics and Its Applications 499:420–7. doi:10.1016/j.physa.2018.02.043
   Web of Science ®Google Scholar
• Lee, W. Y., C. X. Jiang, and D. C. Indro. 2002. “Stock Market Volatility, Excess Returns, and the Role of Investor Sentiment.” Journal of Banking & Finance 26 (12):2277–99. doi:10.1016/S0378-4266(01)00202-3
   Web of Science ®Google Scholar
• Li, H., Y. Guo, and S. Y. Park. 2017. “Asymmetric Relationship between Investors' Sentiment and Stock Returns: Evidence from a Quantile Non‐Causality Test.” International Review of Finance 17 (4):617–26. doi:10.1111/irfi.12120
   Web of Science ®Google Scholar
• Lutz, C. 2016. “The Asymmetric Effects of Investor Sentiment.” Macroeconomic Dynamics 20 (6):1477–503. doi:10.1017/S1365100514000996
   Web of Science ®Google Scholar
• Ma, C., S. Xiao, and Z. Ma. 2018. “Investor Sentiment and the Prediction of Stock Returns: A Quantile Regression Approach.” Applied Economics 50 (50):5401–15. doi:10.1080/00036846.2018.1486993
   Web of Science ®Google Scholar
• Marczak, M., and T. Beissinger. 2016. “Bidirectional Relationship between Investor Sentiment and Excess Returns: New Evidence from the Wavelet Perspective.” Applied Economics Letters 23 (18):1305–11. doi:10.1080/13504851.2016.1153782
   Web of Science ®Google Scholar
• Mbanga, C., A. F. Darrat, and J. C. Park. 2019. “Investor Sentiment and Aggregate Stock Returns: The Role of Investor Attention.” Review of Quantitative Finance and Accounting 53 (2):397–428. doi:10.1007/s11156-018-0753-2
   Web of Science ®Google Scholar
• Neal, R., and S. M. Wheatley. 1998. “Do Measures of Investor Sentiment Predict Returns?” The Journal of Financial and Quantitative Analysis 33 (4):523–47. doi:10.2307/2331130
   Web of Science ®Google Scholar
• Pan, W. F. 2020. “Does Investor Sentiment Drive Stock Market Bubbles? Beware of Excessive Optimism!.” Journal of Behavioral Finance 21 (1):27–41. doi:10.1080/15427560.2019.1587764
   Web of Science ®Google Scholar
• Rakovská, Z. 2021. “Composite Survey Sentiment as a Predictor of Future Market Returns: Evidence for German Equity Indices.” International Review of Economics & Finance 73:473–95. ‏ doi:10.1016/j.iref.2020.12.022
   Web of Science ®Google Scholar
• Rehman, M. U., A. Sensoy, V. Eraslan, S. J. H. Shahzad, and X. V. Vo. 2021. “Sensitivity of US Equity Returns to Economic Policy Uncertainty and Investor Sentiments.” The North American Journal of Economics and Finance 57:101392. ‏ doi:10.1016/j.najef.2021.101392
   Web of Science ®Google Scholar
• Reis, P. N., and C. Pinho. 2020. “COVID-19 and Investor Sentiment Influence on the US and European Countries Sector Returns.” Investment Management and Financial Innovations 17 (3):373–86. doi:10.21511/imfi.17(3).2020.28
   Google Scholar
• Renault, T. 2017. “Intraday Online Investor Sentiment and Return Patterns in the US Stock Market.” Journal of Banking & Finance 84:25–40. doi:10.1016/j.jbankfin.2017.07.002
   Web of Science ®Google Scholar
• Salhin, A., M. Sherif, and E. Jones. 2016. “Managerial Sentiment, Consumer Confidence and Sector Returns.” International Review of Financial Analysis 47:24–38. ‏ doi:10.1016/j.irfa.2016.06.009
   Web of Science ®Google Scholar
• Salisu, A. A., R. Swaray, and T. F. Oloko. 2019. “Improving the Predictability of the Oil–US Stock Nexus: The Role of Macroeconomic Variables.” Economic Modelling 76:153–71.
   Google Scholar
• Sayim, M., P. D. Morris, and H. Rahman. 2013. “The Effect of US Individual Investor Sentiment on Industry‐Specific Stock Returns and Volatility.” Review of Behavioural Finance 5 (1):58–76. doi:10.1108/RBF-01-2013-0006
   Google Scholar
• Schmeling, M. 2009. “Investor Sentiment and Stock Returns: Some International Evidence.” Journal of Empirical Finance 16 (3):394–408. doi:10.1016/j.jempfin.2009.01.002
   Web of Science ®Google Scholar
• Shahzad, S. J. H., N. Raza, M. Balcilar, S. Ali, and M. Shahbaz. 2017. “Can Economic Policy Uncertainty and Investors Sentiment Predict Commodities Returns and Volatility?” Resources Policy 53:208–18. ‏ doi:10.1016/j.resourpol.2017.06.010
   Web of Science ®Google Scholar
• Smales, L. A. 2017. “The Importance of Fear: Investor Sentiment and Stock Market Returns.” Applied Economics 49 (34):3395–421. doi:10.1080/00036846.2016.1259754
   Web of Science ®Google Scholar
• Smales, L. A. 2021. “Investor Attention and the Response of US Stock Market Sectors to the COVID-19 Crisis.” Review of Behavioral Finance 13 (1):20–39. doi:10.1108/RBF-06-2020-0138
   Google Scholar
• Solt, M. E., and M. Statman. 1988. “How Useful is the Sentiment Index?” Financial Analysts Journal 44 (5):45–55. doi:10.2469/faj.v44.n5.45
   Google Scholar
• Sun, L., M. Najand, and J. Shen. 2016. “Stock Return Predictability and Investor Sentiment: A High-Frequency Perspective.” Journal of Banking & Finance 73:147–64. doi:10.1016/j.jbankfin.2016.09.010
   Web of Science ®Google Scholar
• Tetlock, P. C., Saar, M. ‐Tsechansky, and S. Macskassy. 2008. “More than Words: Quantifying Language to Measure Firms' Fundamentals.” The Journal of Finance 63 (3):1437–67. doi:10.1111/j.1540-6261.2008.01362.x
   Web of Science ®Google Scholar
• Tumarkin, R., and R. F. Whitelaw. 2001. “News or Noise? Internet Postings and Stock Prices.” Financial Analysts Journal 57 (3):41–51. doi:10.2469/faj.v57.n3.2449
   Web of Science ®Google Scholar
• Ugurlu‐Yildirim, E., B. Kocaarslan, and B. M. Ordu‐Akkaya. 2021. “Monetary Policy Uncertainty, Investor Sentiment, and US Stock Market Performance: New Evidence from Non-Linear Cointegration Analysis.” International Journal of Finance & Economics 26 (2):1724–38. doi:10.1002/ijfe.1874
   Web of Science ®Google Scholar
• Uygur, U., and O. Tas. 2012. “Modeling the Effects of Investor Sentiment and Conditional Volatility in International Stock Markets.” Journal of Applied Finance and Banking 2 (5):239–60.
   Google Scholar
• Uygur, U., and O. Taş. 2014. “The Impacts of Investor Sentiment on Different Economic Sectors: Evidence from Istanbul Stock Exchange.” Borsa Istanbul Review 14 (4):236–41. doi:10.1016/j.bir.2014.08.001
   Google Scholar
• Verma, R., H. Baklaci, and G. Soydemir. 2008. “The Impact of Rational and Irrational Sentiments of Individual and Institutional Investors on DJIA and S&P500 Index Returns.” Applied Financial Economics 18 (16):1303–17. doi:10.1080/09603100701704272
   Google Scholar
• Vuong, N. B., and Y. Suzuki. 2020. “Impact of Financial Development on Sentiment-Return Relationship: Insight from Asia-Pacific Markets.” Borsa Istanbul Review 20 (2):95–107. doi:10.1016/j.bir.2020.01.003
   Web of Science ®Google Scholar
• Westerlund, J., and P. K. Narayan. 2012. “Does the Choice of Estimator Matter When Forecasting Returns?” Journal of Banking & Finance 36 (9):2632–40. doi:10.1016/j.jbankfin.2012.06.005
   Web of Science ®Google Scholar
• Westerlund, J., and P. Narayan. 2015. “Testing for Predictability in Conditionally Heteroskedastic Stock Returns.” Journal of Financial Econometrics 13 (2):342–75. doi:10.1093/jjfinec/nbu001
   Web of Science ®Google Scholar
• Yang, Y., and L. Copeland. 2014. “The Effects of Sentiment on Market Return and Volatility and the Cross-sectional Risk Premium of Sentiment-affected Volatility.” Cardiff Economics Working Papers, No. E2014/12, Cardiff University, Cardiff Business School, Cardiff.
   Google Scholar
• You, W., Y. Guo, and C. Peng. 2017. “Twitter's Daily Happiness Sentiment and the Predictability of Stock Returns.” Finance Research Letters 23:58–64. doi:10.1016/j.frl.2017.07.018
   Web of Science ®Google Scholar
• Zhang, Y. J., and J. M. Pei. 2019. “Exploring the Impact of Investor Sentiment on Stock Returns of Petroleum Companies.” Energy Procedia 158:4079–85. ‏ doi:10.1016/j.egypro.2019.01.828
   Google Scholar
• Zweig, M. E. 1973. “An Investor Expectations Stock Price Predictive Model Using Closed-End Fund Premiums.” The Journal of Finance 28 (1):67–78. doi:10.1111/j.1540-6261.1973.tb01346.x
   Web of Science ®Google Scholar