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Published stock recommendations as institutional investor sentiment in the near-term stock market

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  • Singer, Nico
  • Dreher, Frank
  • Laser, Saskia

Abstract

This paper investigates the role of published stock recommendations in print and online media as investor sentiment in the near-term German stock market. In line with extant literature on other sentiment measures, vector autoregressions reveal that past stock returns drive today's sentiment, but not the other way around, and that sentiment is a powerful predictor of itself. In particular, sentiment based on printed analyst recommendations follows reversals, that is, when analysts face a stock market downturn, they see a buying opportunity and become optimistic. --

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Bibliographic Info

Paper provided by University of Rostock, Institute of Economics in its series Thuenen-Series of Applied Economic Theory with number 121.

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Date of creation: 2012
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Handle: RePEc:zbw:roswps:121

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Related research

Keywords: analyst forecasts; investor sentiment; media content; VAR analysis;

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  1. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, Econometric Society, vol. 48(4), pages 817-38, May.
  2. Kling, Gerhard & Gao, Lei, 2008. "Chinese institutional investors' sentiment," Journal of International Financial Markets, Institutions and Money, Elsevier, Elsevier, vol. 18(4), pages 374-387, October.
  3. Brown, Gregory W. & Cliff, Michael T., 2004. "Investor sentiment and the near-term stock market," Journal of Empirical Finance, Elsevier, Elsevier, vol. 11(1), pages 1-27, January.
  4. Schmeling, Maik, 2006. "Institutional and Individual Sentiment: Smart Money and Noise Trader Risk," Hannover Economic Papers (HEP), Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät dp-337, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät.
  5. Wang, Yaw-Huei & Keswani, Aneel & Taylor, Stephen J., 2006. "The relationships between sentiment, returns and volatility," International Journal of Forecasting, Elsevier, Elsevier, vol. 22(1), pages 109-123.
  6. Paul C. Tetlock, 2007. "Giving Content to Investor Sentiment: The Role of Media in the Stock Market," Journal of Finance, American Finance Association, American Finance Association, vol. 62(3), pages 1139-1168, 06.
  7. Gregory W. Brown & Michael T. Cliff, 2005. "Investor Sentiment and Asset Valuation," The Journal of Business, University of Chicago Press, University of Chicago Press, vol. 78(2), pages 405-440, March.
  8. Finter, Philipp & Niessen-Ruenzi, Alexandra & Ruenzi, Stefan, 2010. "The impact of investor sentiment on the German stock market," CFR Working Papers 10-03, University of Cologne, Centre for Financial Research (CFR).
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