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

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

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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File URL: http://www.sciencedirect.com/science/article/B6VCY-516MRC2-D/2/61006e344a29a87afac0feeeeaf41a4c
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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
Contact details of provider: Web page: http://www.elsevier.com/locate/jbf

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