The Relationship between Market Sentiment Index and Stock Rates of Return: a Panel Data Analysis
Journal Title: BAR: Brazilian Administration Review - Year 2012, Vol 9, Issue 2
Abstract
This article analyzes the relationship between market sentiment and future stock rates of return. We used a methodology based on principal component analysis to create a sentiment index for the Brazilian market with data from 1999 to 2008. The sample consisted of companies listed on BM&FBOVESPA which were grouped into quintiles, each representing a portfolio, according to the magnitude of the following characteristics: market value, total annualized risk and listing time on BM&FBOVESPA. Next, we calculated the average return of each portfolio for every quarter. The data for the first and last quintiles were analyzed via two-factor ANOVA, using sentiment index of the previous period (positive or negative) as the main factor and each characteristic as controlling factors. Finally, the sentiment index was included in a panel data pricing model. The results indicate a significant and negative relationship between the market sentiment index and the future rates of return. These findings suggest the existence of a reversion pattern in stock returns, meaning that after a positive sentiment period, the impact on subsequent stock returns is negative, and vice-versa.
Authors and Affiliations
Yoshinaga, Claudia Emiko; Castro Junior, Francisco Henrique Figueiredo de
Keywords
Related Articles
- EP ID EP40514
- DOI -
- Views 203
- Downloads 0
Ethical Leadership in South Africa and Botswana
This study was conducted to investigate the extent of ethical leadership practices in African public utilities, given the relatively high corruption reported in such institutions, with consequences of seriously constrai...
International HR Strategy in Brazilian Technology Multinationals
Four cases of Brazilian Multinationals from the information technology [IT] sector were compared in their international Human Resources strategy. The analysis is focused on the development and application of two resear...
The Smoothing Hypothesis, Stock Returns and Risk in Brazil
Income smoothing is defined as the deliberate normalization of income in order to reach a desired trend. If the smoothing causes more information to be reflected in the stock price, it is likely to improve the allocatio...
From Play to Political Action: Prosumerism on Fanvideo Meme Production
Fans are singular productive consumers. One of their typical practices is the production of fanvideos. An increasingly common trend in fanvideos is the creation of memes, a phenomenon of the modern internet related to ir...
Leadership, Personal Values, and Cultural Context in Brazil, China, and the USA
This research examines the association between configurations of personal values and managerial incumbency among professionals in Brazil, the US, and Asia. Our research is different from classical leadership research as...