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The power of bad: The negativity bias in Australian consumer sentiment announcements on stock returns

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  • Akhtar, Shumi
  • Faff, Robert
  • Oliver, Barry
  • Subrahmanyam, Avanidhar

Abstract

This paper examines the equity market reaction to the monthly release of Australian consumer sentiment news. Our results indicate that consumer sentiment has valuable information content. Further, we document a version of the "negativity effect" (from the psychology literature) in which, upon announcement of bad (good) sentiment news, the equity market experiences a significant negative (no) announcement day effect. Notably, we find that the market recovers from the bad news shock relatively quickly post-announcement. The results are robust to a broad range of additional tests.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Banking & Finance.

Volume (Year): 35 (2011)
Issue (Month): 5 (May)
Pages: 1239-1249

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Handle: RePEc:eee:jbfina:v:35:y:2011:i:5:p:1239-1249

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Related research

Keywords: G14 Investor sentiment Stock market returns Market efficiency;

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References

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Citations

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Cited by:
  1. Akhtar, Shumi & Faff, Robert & Oliver, Barry & Subrahmanyam, Avanidhar, 2012. "Stock salience and the asymmetric market effect of consumer sentiment news," Journal of Banking & Finance, Elsevier, vol. 36(12), pages 3289-3301.
  2. Akhtar, Shumi & Faff, Robert & Oliver, Barry & Subrahmanyam, Avanidhar, 2013. "Reprint of: Stock salience and the asymmetric market effect of consumer sentiment news," Journal of Banking & Finance, Elsevier, vol. 37(11), pages 4488-4500.

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