Predicting the sensitivity of trading intensity to investor sentiments and beliefs: Evidence from the French stock market
AbstractIn this study we show that investor sentiment plays a key role in explaining trading intensity and market trend changes. Based on both econometric and fuzzy logic approaches, the empirical findings demonstrate that pessimistic sentiment has a particularly significant impact on the French financial market trend. Moreover, the results suggest that the impact of pessimism on asset returns exceeds that of optimism as a direct indicator of investor’s beliefs. Indirect indicators of agent sentiment present more smoothed effects on these two market components. Our results indicate that incorporating psychological factors in macro-financial models leads to better supervision and control of the main drivers of the markets.
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Bibliographic InfoPaper provided by Department of Research, Ipag Business School in its series Working Papers with number 2014-182.
Length: 26 pages
Date of creation: 25 Feb 2014
Date of revision:
Fuzzy sets; Finance; Investment analysis; Animal spirits;
Find related papers by JEL classification:
- A12 - General Economics and Teaching - - General Economics - - - Relation of Economics to Other Disciplines
- G1 - Financial Economics - - General Financial Markets
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
This paper has been announced in the following NEP Reports:
- NEP-ALL-2014-03-30 (All new papers)
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